Published below article more than a year ago that is actually even more relevant today.
Martin Feldstein, Harvard professor of economics thinks it will. If it wasn’t for the Euro the current situation would have been easier for Greece to handle, he says.
Will it really go that far? Not overnight, but nobody would have believed that Lehman Brothers would go bankrupt. Or Russia defaulting a decade earlier for that matter.
Have always wondered how the Euro zone could have one central bank for numerous countries whose economies are so different. Seems to me like a recipe for disaster. As we know, the Euro was Chancellor Kohl’s baby and it is doubtful if it would ever have become reality without his dedicated work to celebrate the unification of Germany with a common currency. But something is very wrong when the economies of EU countries that stayed out of the common currency are doing better than the ones who joined.
Greece can neither grow out of trouble, because of fiscal retrenchment and its lack of export prowess, nor devalue, because it is in the euro zone. And yet its people seem unwilling to endure the cuts in wages and services needed to make the economy competitive. And we can’t blame them? A previous government had, with the help of Wall Street, falsified the national accounts. But nevertheless, Greece looks bust and unfortunately for the people someone has to pay.
If Greece still had the drachma they would have been able to do quite a few things such as devalue and increase exports as well as revenues. To make a long story short the drachma would have made it much easier, and less painful, for Greece to tighten up its policies and get its act together.
What can be done then? The escalating crisis—and the fact that Greece will almost certainly not be able to pay everybody on time—will renew calls to abandon it. That would spell trouble for Greece, European banks as well as other European countries. Almost makes me think of the domino effect Lehman Brothers had.
Do you agree with Professor Feldstein that Greece will ultimately have to go bankrupt? If so, how do you believe it will affect the Euro?
Photo: Flickr – alles-schlumpf