Exit the euro, cut international debt and public expenditure and economic growth is the solution for Greece

  The hard euro is the right glove for Germany

With the new painful austerity measures for Greece by the Internationally Monetary Fund and the European Union, we have to accept worse days in a barrel without a bottom.  Our accession to the euro was supposed to improve, if not for the welfare of the Greek economy. But the opposite happened. Never in the postwar period living with our currency, the drachma, had we seen such a disaster like this. After the initial failure of the measures of the I.M.F. and the E.U., a new recipe for deadlock is now at stake.


Taking even more burdensome measures, coupled with controlled bankruptcy by restructuring or partial cut debt, but alas, to stay in Eurozone. This scenario is even more criminal against the hapless country. The hard euro is the right glove mainly for Germany which after loosing two world wars, is winning the third in present times, the economic world. Euro is killing the hope for our resurrection. It maintains forever a nonexistent economic competitiveness which will lead us in the next 5-10 years, to our inability to restore our productive capacity, to perpetuate misery and poverty, in new deficits in new loans, a permanent political and economic subordination.
 

The Euro is killing the regional economies and not only Greece.

Our entrance to the Eurozone in 2002, together with the Government’s mismanagement of the last fifteen years, (with primary responsibility of Prime ministers Simitis and Karamanlis), threw our economy to ashes. And nowadays any hopes for a better future are flying way. The economy has fallen into a recessionary vortex which leads to further contraction in domestic consumption and reduce the tax base. Imported products from our competitive economies that trade internationally with soft  currencies remain cheaper or much cheaper than ours.

The main focus of the regional Greek economy on tourism and agriculture, requires labor-intensive production process. Labor costs can not be compressed below a certain level so that the total production costs will be lower or equal to that of our competitors. The room in a Greek hotel costs about twice than a counterpart in Turkey, Egypt, Bulgaria, Romania, Hungary and not only. Our oranges, lemons, peaches, cherries, olives falling from our trees and rot, are supplemented by cheaper imports from faraway Argentina, Morocco, Egypt, etc. Is “the economy stupid”?. Not of course. 

The "clever” Germans and Dutch  import agricultural products from outside the Eurozone, they baptize them European and re-export them to the "stupid Greeks» The cost of fertilizers produced by oligopoly companies in north Europe cost more than double for Greece with  relevant consequence for production costs. Imported Greek armaments from the west, in the last ten years, cost about 90 billion Euros, a sum almost equivalent to our original deficit. Turkey, the country - terrorist in the region, has ridicule international law, but remains a candidate for entering European Union. It continues to direct straight threats to Greece’s and Cyprus’s territorial integrity and obliges us to spend to armaments the largest portion of G.N.P. internationally after the U.S.A. The same country bombards us with masses of 200.000 illegal immigrants yearly, at the same time that our children have begun to flee abroad, with tragic consequences for our ethnic and cultural balance, as well a for the labor market.

The suit of the Euro is cut in Germany's measures

The suit of the euro is tailored to the measures of Germany, which produces oligopoly products of capital intensive, of high technology and innovation. The cost of these products can be compressed significantly and profit margins are huge. So the tough euro, this disguised mark, permits Germany to accumulate huge foreign exchange surpluses and speculating on the also huge difference of spreads. Exploring the impact of the euro upon other countries, we show an impressive finding that we suspected.

The developmental course of the PIGS (Portugal, Italy, Greece, Spain), kept on well before joining the euro in 1999-2002, but drops downwards something a little later. The same is more or less true for most Eurozone countries and especially for Ireland, Cyprus, Slovenia, Slovakia, Estonia, Belgium. Instead, countries outside the Eurozone such as Britain, Denmark, Sweden, Czech Republic, and Bulgaria, Hungary, Poland, Romania, maintain a steady upward growth trend, with partial decline with the advent of the crisis of 2009.[2]

China with soft yuan develops exponentially, like Argentina after disconnecting its currency from the hard dollar, though less hard than the euro. Countries outside the EU like Norway, Serbia, Turkey withstand the crisis, as does Russia and others. It is true that the exit from the euro will initially be painful for our country. But now we also experience painful hours, but without hope for tomorrow.

Our partners, and particularly Mrs. Merkel, do not care about us but for the dangerous domino that will cause Greece‘s output from the Eurozone. Yet, the maintenance of our economy in a state of economic paralysis, does not allow recovery hopes. This is also bad for Europe and perhaps even more than that. Our poor competitiveness, our shrinking domestic production and consumption at present, is leading to a vicious circle of debt defaults and the need for more and more new loans. And over the longer term, this is burdensome to all, even for our lenders.

What we do

As things stand today, a clear solution is a controlled bankruptcy by cutting about 50% of total debt, with a grace period of two years to start repayment of the remaining 50%, by extending the repayment period, and above all, the exit from the euro, within the European Union. The new drachma will be deflated and can be directed at levels of a reasonable rate linked with a basket of currencies which will contain the euro, the dollar and other soft currencies of our competitive countries.

Another solution is the creation of a second euro of the peripheral European countries. In any case, the present political measures of dismissals and/or of redundancy of civil servants, the tragic uprising of unemployment, the excessive compression of labor rewards and of pensions, other for being inhumane, are uneconomic. They lead to a large drop of domestic demand, as well as to wide social uprising with tragic economic and social consequences. No doubt, there is an urgent need for government spending cuts, modernizing public administration, social insurance and health care, combating corruption, impunity, bureaucracy and reducing tax evasion.

As an active development policy, there is also a need to support healthy industrial and manufacturing units and promoting strategic sectors of the economy to alternative energy, exploiting oil, gas and mineral resources, promoting quality and marine tourism, competitive and/or alternative agricultural crops, aquaculture, food industry and fertilizers, of defense products, shipbuilding, pharmaceutical, transportation, financial services, new technologies, research and innovation. But for all that, should the country be ruled by a sense of fairness with efficiency, competence and honesty by the best political human force and not by the worse.

By Theodore Katsanevas

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[1] Ph.D.(L.S.E.),Professor of economics, University  of Piraeus, Greece. www.unipi.gr/katsanevas, kats@unipi.gr,  thkatsanevas@gmail.com

[2] E.U countries within the Eurozone are Austria, Belgium, France, Germany, Greece, Estonia, Ireland, Spain, Italy, Cyprus, Luxembourg, Malta, Holland, Portugal, Slovakia, Slovenia, Finland and outside are Bulgaria, Denmark, Leetonia Lithuania, G. Britain, Hungary, Poland, Rumania, Sweden, Czech Republic.