people in motion

people in motion

lundi 20 février 2012

Greece Will Leave the Eurozone

A Greek exit from the euro zone would be traumatic and the potential for serious policy errors exist. 
However, Greece’s fiscal path is not sustainable as part of a currency union dedicated to a strong currency and immediate fiscal balance, even with a haircut that takes government debt to GDP down to 120%. 
Moreover, even with Greece fulfilling the Maastricht criteria after a haircut down to 60% government debt to GDP that includes ECB (public sector) involvement, the lack of euro zone convergence means these problems will arise again. Greece is simply not competitive as part of a currency union with Germany – and it never will be. That means almost permanent fiscal transfers and a loss of Greek fiscal sovereignty. 
The political will necessary to support this solution does not exist. And so Greece will exit the euro zone. 

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