Germany Not Greece Should Exit Euro, Argentina’s Nielsen Says

Germany should exit the euro and revalue its currency as “damage control” to avoid the effects of contagion stemming from a Greek exit, which would cripple banks and trade in Europe, according to former Argentine Finance Secretary Guillermo Nielsen.

Germany’s higher productivity warrants a higher, less competitive valuation for its currency, Nielsen, 61, said in a phone interview yesterday. A Greek exit would be more costly and threatens the solvency of the region’s banks, he said.

“The discussion so far has been framed by the predominant power in the region, Germany,” said Nielsen, named finance secretary in 2002, months after Argentina defaulted on $95 billion of debt. “Instead of searching for the truth, they continue to keep the discussions under politically correct guidelines. They need to break the standstill.”

A German exit would be easier to promote than a devaluation of the periphery and would help generate confidence, Nielsen said from Buenos Aires, where he is a consultant. Politically, it won’t be feasible for Germany to increase transfers to southern Europe, he said.

Meanwhile, the rest of Europe needs to push through “radical change,” and Greece should issue paper bills to use as quasi-currency immediately, according to Nielsen.

“A cross between an I-owe-you and paper money would help bridge the funding gap and avoid Greece going down the drain,” said Nielsen. “Simultaneously, Greece should stop all movements of capital. They should have done that a long time ago.”

To contact the reporter on this story: Elisa Martinuzzi in Milan at emartinuzzi@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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