Let Greece Go
The never ending sturm und drang over the state of Greek debt, membership in the euro zone and the potential shocks of a debt default have moved from tragedy to comedy to monotony.
The solution is simple. It won’t be fast, it won’t be easy, but it will be a huge improvement for all concerned.
Let Greece go.
Hey Greece -- if anyone is listening -- just default on the debt and start anew. The rest of Europe has caused the country and everyone else enough agita: just let Greece leave the euro zone in peace. Sure, it will be a long torturous process, but at least Greece -- and maybe the euro region -- will start moving in the right direction.
QuickTake Greece's Fiscal Odyssey
In case anyone forgot: Greece never should have been in the euro zone in the first place. Based on the formal entry requirements, it never met the membership standards. With a little help from the Wall Street magicians it lied and cheated its way in, disguising its debt levels and fiscal health. As Spiegel wrote five years ago, “Goldman Sachs helped the Greek government to mask the true extent of its deficit with the help of a derivatives deal that legally circumvented the EU Maastricht deficit rules.” Greece should have been given the treatment a teenage drinker would get after being discovered in a bar: tossed out and not allowed in until meeting the entry qualifications.
Regardless, it is now in Greece’s own best interests to show itself the door. There should be no doubt, as Martin Wolf points out in the Financial Times, that like most divorces, this one will be acrimonious. But the sooner it starts, the sooner Greece can begin the process of starting an economic recovery.
Related: Greece Default Watch
Despite the pain -- and there will be substantial pain, I assure you -- the benefits are many. Here are a few that might persuade Greece to pack its bags and leave the abusive relationship it's in with the EU:
1) Bringing back the drachma: Greece would get to manage its own currency, and it can join in the rest of the world’s devaluation race to the bottom. As is, it is tied to the euro, which truth be told works best for the region’s most efficient producer, Germany. For other nations, the benefits are more modest. For Greece, the euro has been a huge negative for the past half-decade.
Don’t underestimate the advantages of a country such as Greece having its own currency. It will give it a level of control far greater than it has now.
A new drachma would fall, perhaps dramatically, versus the euro and dollar. That creates an opportunity to sell exports inexpensively versus the competition. Plus, it's great for tourism, Greece's biggest industry, and would help the country's agriculture producers. It might also give Greece an opportunity to expand the service sector. If the Brits could do it, so can Greece!
2) An independent central bank: Don't sell short the advantages of having a Greek version of the Federal Reserve. What fun! A Greek central bank can hold pressers, host conferences and publish research. In the U.S., we do this thing with dots that's just hilarious! It’s all terrific stuff, and will give Greece a wonky forum to bash Angela Merkel, just for kicks.
Caveat: It is important not to cause a global financial crisis or hyperinflation. If that happens, the I-told-you-so crowd will never shut up.
3) Tax collection: I know, I know: the Greek people don’t like to pay their taxes. Who does? Evasion costs the public coffers $30 billion a year. Athenians declare poverty, yet satellite photos of the city show 16,974 swimming pools, while its residents claim to have just 324.
As amusing as that is, Greeks have a choice: follow the strictures of the EU and the International Monetary Fund, as dictated by Germany, or take control of the future and make independent decisions. The only way that is going to happen is tax collection. The country will have to grow up and learn how to do it.
The bottom line is this: There is no easy end in sight for the absurd dance Greece has found itself stuck in with its European colleagues. It needs to start fresh. To quote my colleague Josh Brown, “The reason we're all getting sick of the Greek drama is they haven't killed off any main characters yet and it's already season 5.”
Before season six begins, Greece and the EU should stop delaying and move toward the inevitable conclusion of this sorry spectacle.
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
To contact the author on this story:
Barry L Ritholtz at firstname.lastname@example.org
To contact the editor on this story:
James Greiff at email@example.com