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23 Μαΐ 2015

The proposal for a soft a soft temporary divorce of Greece from the euro zone with a double currency and within the E.U is the only solutionThe proposal for a soft a soft temporary divorce of Greece from the euro zone with a double currency and within the E.U is the only solution

Recent developments in the bargaining front between Greece and the Eurozone leaders and basically with Berlin appear to lead to a deadlock. More than half of the German citizens now prefer the Grexit, according to a recent gallop. Mr Schauble and other German politicians and media, attack  the Greek Government fiercely. In Greece, anti German feelings are growing tremendously and movements of sabotaging German products are on the rise. Greeks cannot accept that, German large debts due to wars where given away with the treaty of London in 1953 and Greek loans mainly due to their government’s corruption but also because of interest rates, cannot be partly cut. After six years of a modern Greek tragedy, in their despair, many citizens and several politicians here are looking east, towards the Russian and the Chinese umbrella.

Against all this madness and not only, there arises a reasonable compromise : a soft temporary divorce of Greece from the euro zone with a double currency but within the E.U and the return back ( Greturn) when the Greek economy will regain its competitiveness and appropriate conditions are established.

This realistic proposition was revived recently, among st others,  by the top German economists Hans-Werner Sinn and Tomas Mayer who visited Greece recently and spoke with the Prime Minister Alexis Tsipras. It is  said that, Wolfgang  Schäuble also made a similar proposition to Greek officials. Yet, Mr. Varoufakis, our controversial minister of the Economy and commentators from left to the right, denied fiercely such a possibility, a common negative attitude to  anything new and unknown to them.

Under the present geo-political circumstances, the enforcement of the temporary double current currency arises as the best solution to the deadlock. Within the E.U. and under necessary controls of currency movements, the euro will coexist with the new drachma, a practice also common in many other countries. In such a way, the domino effect   that may lead, as said, to the breakup of the euro zone, will be avoided. Berlin and Athens will also avoid the bitterness and the ridiculous war of words and actions between themselves. Greece of course cannot win this mini war. But Germany may also lose more than gain from such a meaningless confrontation.

A soft Grexit accompanied with double currency, a drachma gradually devaluated at levels of no more than 50% relative to the euro, with balanced budgets, tidying up of the economy, targeted development, strengthening domestic demand to tackle unemployment and poverty, combat tax evasion and corruption, can lead the country to growth. The loans issue may be discussed at a logical and realistic way. In any case, as things stand now, the present mountain of our debts that are continually growing, cannot ever be paid, this is for certain.

The introduction of our national currency must be accompanied with intense caution for controlling inflation. The issuing of money, should not exceed a certain size to be in the range of 10-15% of GDP, according to the known markers M2, etc. With prudent government management and predictability, there will be no lack of basic essentials goods, food, medicine, fuel, etc. The economy may soon regain its competitiveness mainly through its strong tourist sector which will be highly benefited by a devalued currency. Thus, upon this road there is hope. While now with the hard euro, the recession policies and liquidity cuts, hope has escaped. The Memorandum may be perceived as a tragic glaring slap, as a useful lesson for us, so as not to repeat past mistakes. Maybe we needed the German rationalism somewhere.

 But Greece cannot and will not become Germany and vice versa. As said  “whatever does not kill you, it makes you stronger”. The lesson has been learned. Now, we must move forwards and decide about our future, if necessary with a referendum and lead the country to a better future. The expulsion of depression and poverty, the temporary transition to our national currency, in co-existence with the euro, with the right development strategy, tide government, efficiency and integrity, with national dignity and social justice, is currently the only way out from the modern Greek tragedy. For this, a soft temporary divorce of Greece from the euro zone but within the E.U. is the only solution.

Theodore Katsanevas ( Ph.D., L.S.E.) is an economics professor at the University of Piraeus, Greece.