On July 21, the Financial Times published an article about Greece entitled, A Grexit is starting to look more feasible for Athens-For Greece to reform and not default makes sense only from Berlin’s perspective.
In this article, Wolfgang Münchau describes what would happen in the country if it left the Eurozone, “If Greece were to depart, it would be cut off from external funding. It would presumably not service its foreign debt, at least for a while. It would then introduce its own currency during an enforced bank holiday period. There would almost certainly be a recession in the ensuing period, but a real depreciation could bring back growth in the future. The single largest benefit would, at least initially, come through a boom in tourism.”
The Financial Times points out the paradox, or the “irony” as it writes, of the Eurozone policy towards Greece, by stating that, “Reforms and austerity constitute simultaneously a precondition to stay in the Eurozone, and a precondition for a departure.”
According to the newspaper, Greece is now on the horns of a dilemma consisting of the two opposing options, “The first is to reform and default inside the Eurozone – a strategy that requires willing accomplices in other European capitals and in the European Central Bank. The second is to reform and default outside the Eurozone – a decision Greece could take unilaterally, provided the macroeconomic conditions are right.”
“Of course, the realization that a departure from the Eurozone may be economically feasible, or even advantageous, may count for nothing. A country may decide to stay inside the Eurozone for political or security reasons. But surely we are at a different stage of debate when an exit becomes economically viable,” Wolfgang Münchau concluded.
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