Hans-Werner Sinn, a German professor of economics at the University of Munich and President of the Ifo Institute for Economic Research, has recommended that debt-crushed Greece’s best option, despite international bailouts, still is to get out of the Eurozone.
He said other European Union countries with similar economic problems, such as Portugal, should also follow suit or they won’t recover.
In an article in The Financial Times, he said that the monetary area seems to be stuck in an economic crisis that has caused unbearable unemployment to southern Europe.
He highlighted that countries which cannot cope with this huge economic crisis should be allowed to exit the euro and be readmitted after they have devalued and implemented structural reforms.
The Eurozone is not a united federal state so its currency, the euro, cannot function as the dollar does. He said it should be somewhere closer to the old Bretton Woods currency system, under which countries could exit and re-enter at different prices.
According to Sinn, Greece would benefit from orderly exit followed by devaluation. Exit should be accompanied by haircuts that convert debt into national currencies and an option to re-enter at a later date would strengthen the country’s zest for reform. Finally it is stressed that a common debt moratorium for overly indebted countries not exiting the euro may also be needed.
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