After The “No” Vote, Soft Grexit Landing Now EU’s Best Option

[geek tragedy]

Both sides are right, at least partly so. Greece has failed the euro, and the euro has failed Greece. Greece never lived up to the responsibilities of euro membership, and the creditor countries never came up with a realistic or fair plan when the troubles began.

These problems aren’t going away. After seven years of deepening crisis, it has become evident that Greece cannot change enough to fit in the European monetary union—and that the European monetary union cannot change enough to accommodate Greece. In such a case, there is only one real option: Greece needs to leave the euro, and its partners and allies need to assist it in making as smooth a transition as possible.

...


There is little to be gained by pretending anymore; this country can’t prosper using this currency as a monetary base. Greece and the EU don’t need a divorce, but for the marriage won’t work without separate checking accounts.

For Greece to leave the euro won’t be the end of Greece and it won’t be the end of the euro. Instead of the endless, wretched battles over how to extend a bailout that doesn’t bail and to negotiate reform programs that the Greek government lacks the will and the capacity to implement, it is time to talk about how Greece can return to prosperity and stability inside the EU but outside the euro. A return to the drachma with the support and assistance of the rest of the EU, the international financial system and the United States would be a very different thing than the collapse and panic that would attend an unplanned, unfunded Grexit.

http://www.the-american-interest.com/2015/07/05/after-the-no-vote-soft-grexit-landing-now-eus-best-option/

[libdem4life]

1. But what about the others who are no longer enamored with this "union". Will they get a soft

exit, too? It may send the wrong signal...underestimating the discontent.

[geek tragedy]

2. 'Soft' is a relative term. They're in for at least another decade of misery.

Not sure anyone is thinking "hey, Greece is a model of success."

At the same time, showing less austerity dogmatism could take the wind out of the sails of the anti-Euro movements.

[unblock]

3. exiting the euro will be a harsh path indeed, i don't think other countries will envy greece.

going to its own currency has certainly has the benefit of being a proven path to getting a country back to on its feet, but only after massive devaluation and with it, severe loss of savings for many. this would be massively painful. but it is proven medicine, unlike endless austerity, and will eventually lead to a stable and growing economy.

but after spain and italy and portugal see greece lose something like 2/3rds of its value in less than a week after introducing a new drachma, i don't think they'll be itching to get next in line.

not that it will be necessary. i think the politics are a bit like the politics of lehman going bankrupt. the had to let the first one go, but that gave them political cover to save the rest of them.

similarly, i think greece will have to leave the euro, but that will give the troika the political cover to come up with a more accommodating approach to other troubled countries.

interesting times....

[geek tragedy]

4. Grexit would be more of a psychological blow than a substantive one

to the Eurozone.

Its economy is 1/8th that of Italy. The Eurozone needs Italy, it would prefer to keep Greece.

[unblock]

5. true; it's the "fear of contagion" that's the real problem.

but it seems clear that only a grexit will change the political dynamics to force the troika to shift so fix the fundamental flaws of the euro.

america subsidizes states with poorer economies by raising federal dollars from states with better economies and sending it to states with weaker ones. we sometimes have some political discussions about the matter (or would if we had a functional political system) but mostly we just accept it as the price of having a uniform currency across 50 states.

the euro is an experiment in having a uniform currency without those subsidies, it's not viable in the long run as is without inevitably leading to situations like greece's. the euro can be saved, but either the need to by ok with countries exiting, devaluing their own currency, then possibly re-entering; or they need to find a way to subsidize economies in trouble.

[geek tragedy]

7. Or it just needs to shrink to include a more homogenous

group of countries.

[fasttense]

6. This is silly

There is no reason for Greece to leave the Euro or the EU. All needs to happen is for the EU to give debt forgiveness like Germany got after WWII. Nothing else needs to happen. Greece did not vote to exit the EU or the Euro.

Is the EU so enamored with austerity and getting every imaginary cent a bankster cooked the books for that, they are willing to feed into their own fear mongering? Debt forgiveness equal to what has been done for other EU nations is all that has to happen.

[geek tragedy]

8. All that needs to happen is a gift of $350 billion?

Who knew the solution was so easy and inexpensive?

[bemildred]

10. You already gave them the money, that's a sunk cost.

And it's already admitted it will never be repaid.
So the question is, what will best stanch the bleeding now?
And that requires a "reality-based" decision based on what might actually, someday, be repaid as to how much debt must be cancelled, and the banks made to eat it, which they can easily do, they just don't want to. It will be beneficial for them to reconnect with the idea that making loans that cannot be repaid is a bad idea, bank-wise.

[libdem4life]

9. This has been quite an education...thanks to all upthread. There is still that vague sense that

system of globalization is unsustainable...including our latest and greatest secret trade agreement. Just have to wait and watch.