Time for Greece to leave the euro
It is difficult to overstate how badly the Greeks were misled by the IMF and EU. Greece’s only path forward is to reintroduce its own currency.

Article Highlights

  • #EU gave #Greece a double dose of a medication already making the country weak

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  • Greece should leave the euro and bring back the drachma

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  • A newly elected Greek government should take a fresh look at #Greece’s economic policy options

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After five years of wrenching economic recession, one has to wonder what it will take for Greece to cut itself loose from the failed IMF and EU policies that have reduced the country to its present terrible economic pass. The Greek government has signed off yet again on an IMF-EU adjustment program that imposes upon Greece the very same recipe of severe fiscal austerity and structural adjustment—without the support of an exchange rate change to boost its external sector—that has previously failed so spectacularly to solve her economic woes.

In May 2010, when Greece signed on to its first IMF-EU program, it was assured by those organizations that the cost of austerity would be limited. It was also assured that the Greek government would be able to re-access the international capital market by 2012, if it followed the IMF prescription of draconian fiscal austerity and structural reform.

According to the IMF, any Greek recession would be short-lived and the country would be in recovery by the end of 2011. In the IMF’s assessment, there was absolutely no need for the Greek government to seek debt relief. And there was certainly no need for Greece to consider the possibility of reintroducing the drachma as a means to promote its external sector with a cheaper currency as an offset to severe budget tightening.

Read the full article on American.com.

Desmond Lachman is a resident fellow at AEI.

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About the Author

 

Desmond
Lachman
  • Desmond Lachman joined AEI after serving as a managing director and chief emerging market economic strategist at Salomon Smith Barney. He previously served as deputy director in the International Monetary Fund's (IMF) Policy Development and Review Department and was active in staff formulation of IMF policies. Mr. Lachman has written extensively on the global economic crisis, the U.S. housing market bust, the U.S. dollar, and the strains in the euro area. At AEI, Mr. Lachman is focused on the global macroeconomy, global currency issues, and the multilateral lending agencies.
  • Phone: 202-862-5844
    Email: dlachman@aei.org
  • Assistant Info

    Name: Emma Bennett
    Phone: 202.862.5862
    Email: emma.bennett@aei.org

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