March 4, 2021

Greece Feels Push Toward Euro Exit

In fact, that is the sentiment a growing number of reputable economists and other commentators, particularly from fully liquid Germany, have been expressing lately.

Greece, they say, should leave the euro zone for its own good, as well as the Continent’s. Some German economists argue that other members of the 17-nation currency union, like Portugal or even Italy, might need to leave as well.

“It is better for all concerned, in particular for Greece, if the country leaves the euro temporarily,” Hans-Werner Sinn, president of the influential Ifo Institute at Ludwig Maximilian University in Munich, wrote in an essay published two weeks ago.

Continuing to throw money at Greece will only reduce incentives for the country to restructure its economy, he and other experts say, while pushing Europe toward a so-called transfer union where the stronger countries are required to prop up the weaker ones.

As it turns out, there is no provision in E.U. law for a member to be ejected, according to legal experts. Greece would have to withdraw voluntarily. But if the other countries cut off aid, it might have little choice.

Among European economists outside Germany, the idea that a country should be put under pressure to leave the euro zone is regarded as reckless and cruel. Greek banks would fail, the country would default on its debt and would lack a credible currency with which to buy essential imported goods like oil or even food. The whole euro area would suffer as investors feared the disintegration of the currency union and perhaps even the European Union itself.

“It’s very risky,” said Silvio Peruzzo, an economist in London for Royal Bank of Scotland. “It would set a precedent for other countries leaving the region, and the market would start to flirt with the idea that the euro as a whole doesn’t make sense.”

But in Germany, with its embedded fear of inflation and insistence that individuals should suffer the consequences of their actions, the idea that Greece should just leave is gaining wider currency, even in elite circles.

Otmar Issing, a former chief economist of the European Central Bank and one of the architects of the common currency, has implied that Greece should exit.

Asked about his position by e-mail, Mr. Issing answered indirectly, saying that countries that break the rules of monetary union — as Greece did — should have to fend for themselves.

“If a country does not comply with the conditions agreed on, it should not get further financial aid,” he said. “A country which does not get further support has to decide what to do.”

Mr. Issing and Mr. Sinn are both extremely influential, and their thinking provides an intellectual foundation for opinions widely held by ordinary Germans. Chancellor Angela Merkel is facing intense pressure within her own center-right party, some of whose members are pushing for a special party congress to discuss the debt crisis.

Meanwhile, such German attitudes get plenty of publicity in Greece and other stricken euro countries, where they feed stereotypes of arrogant, domineering Germans and stoke the resentments that are already deeply straining European unity.

Greeks, it seems, are as fed up with Germany as Germans are with Greece. As plumes of tear gas bathed the streets of Athens in June, for example, many protesters volunteered that they wanted the drachma back.

“We don’t care about staying in the euro,” said one protester, who gave his name only as Dimitris. “It would be costly, but at least with the drachma we would be able to control our own currency and our own future.”

Greeks have still not gotten over a cover of the German magazine Focus last year that depicted the Venus de Milo raising a middle finger. “Cheats in our euro family,” said the headline, a reference clearly aimed at Greece.

“People believe Greeks don’t pay our taxes and we don’t want to work,” said Christos Manolas, a Greek businessman. “That’s a myth perpetuated by the Germans.”

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