Eurozone crisis: Greece considering leaving the Euro and bringing back the drachma

The economic and fiscal variations within the Eurozone have become too large to be hidden away and perhaps it is time for the Euro to split. A two-tier Euro could be an interim solution but it makes no sense to force the currency to compensate for and match the wildly different shapes of the member economies.

Greece going back to the drachma or to an “olive” Euro may not be such a bad thing for the rest of the Eurozone though it will only probably lead the Greeks to delay taking the actions that will anyway be necessary. Fiscal profligacy cannot be sustained.

back from the euro to the drachma?

Der Spiegel:

The debt crisis in Greece has taken on a dramatic new twist. Sources with information about the government’s actions have informed SPIEGEL ONLINE that Athens is considering withdrawing from the euro zone. The common currency area’s finance ministers and representatives of the European Commission are holding a secret crisis meeting in Luxembourg on Friday night.

Greece’s economic problems are massive, with protests against the government being held almost daily. Now Prime Minister George Papandreou apparently feels he has no other option: SPIEGEL ONLINE has obtained information from German government sources knowledgeable of the situation in Athens indicating that Papandreou’s government is considering abandoning the euro and reintroducing its own currency.

Alarmed by Athens’ intentions, the European Commission has called a crisis meeting in Luxembourg on Friday night. In addition to Greece’s possible exit from the currency union, a speedy restructuring of the country’s debt also features on the agenda. One year after the Greek crisis broke out, the development represents a potentially existential turning point for the European monetary union — regardless which variant is ultimately decided upon for dealing with Greece’s massive troubles.

Given the tense situation, the meeting in Luxembourg has been declared highly confidential, with only the euro-zone finance ministers and senior staff members permitted to attend. Finance Minister Wolfgang Schäuble of Chancellor Angela Merkel’s conservative Christian Democratic Union (CDU) and Jörg Asmussen, an influential state secretary in the Finance Ministry, are attending on Germany’s behalf.

…… Sources told SPIEGEL ONLINE that Schäuble intends to seek to prevent Greece from leaving the euro zone if at all possible. He will take with him to the meeting in Luxembourg an internal paper prepared by the experts at his ministry warning of the possible dire consequences if Athens were to drop the euro.

“It would lead to a considerable devaluation of the domestic currency against the euro,” the paper states. According to German Finance Ministry estimates, the currency could lose as much as 50 percent of its value, leading to a drastic increase in Greek national debt. Schäuble’s staff have calculated that Greece’s national deficit would rise to 200 percent of gross domestic product after such a devaluation. “A debt restructuring would be inevitable,” his experts warn in the paper. In other words: Greece would go bankrupt.

It remains unclear whether it would even be legally possible for Greece to depart from the euro zone. Legal experts believe it would also be necessary for the country to split from the European Union entirely in order to abandon the common currency. At the same time, it is questionable whether other members of the currency union would actually refuse to accept a unilateral exit from the euro zone by the government in Athens.

What is certain, according to the assessment of the German Finance Ministry, is that the measure would have a disastrous impact on the European economy…..


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5 Responses to “Eurozone crisis: Greece considering leaving the Euro and bringing back the drachma”

  1. EU Leaders At Non-Existing Meeting To Discuss A Total Fantasy Which They Know Nothing About | EconoTwist's Says:

    […] Eurozone crisis: Greece considering leaving the Euro and bringing back the drachma ( […]

  2. Dancing to that voodoo rhythm, the economics boogie | Says:

    […] Eurozone crisis: Greece considering leaving the Euro and bringing back the drachma ( […]

  3. German exports at all time high – proof of two-speed Eurozone « The k2p blog Says:

    […] is also an attempt by the German media to create a narrative that it is not unthinkable for a country to leave (or be pushed out from) the Euro. Last […]

  4. Alexander The Great Says:

    Not sure if people are aware of the real situation in Greece from my perspective in regards to Greece History.
    Firstly I do not deny the fact Greece was mismanaged by Governments, not to mention people not paying the proper amount of taxes.
    Germany will continue to bail out Greece until the end of the world. In WW2, Germany stole $ Billion’s upon $ Billion’s worth of Greek GOLD BARS. Why doesn’t Germany give that back to Greece?
    Next, Germany sold over a $ Billion worth of navel ships to Greece, which later on we found out they were very poorly built, and that Germany did not comply to certain standards. More waist of money.
    Once again, there is a lot of History within Europe that many don’t know.
    As for Greece paying off it’s debt, easy, they got mountains of Natural Resources such as Gold & Silver that are Government owned. Why are they not selling this to pay? In my opinion, they are instructed not to because Greece is not being run by Greeks but by Special Interest groups with a hidden addenda. Of course, this is all In My Opinion…

  5. banking Says:


    […]Eurozone crisis: Greece considering leaving the Euro and bringing back the drachma « The k2p blog[…]…

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