I do apologise for this, but I have to come back to the Greek situation.
Briefly, on 4 July 2012, Roger Bootle and his team of six beat something like 400 other competitors for a £250,000 prize. Roger Bootle used to be the Chief Economist at HSBC, and now runs Capital Economics, which employs nearly 100 people.
The task was to recommend how a euro country could leave the eurozone without a complete catastrophe. The winning submission is 25,000 words long, is in English, and can be found at www.policyexchange.org.uk
Briefly, the key recommendations by Bootle’s team included:
- Plan your exit in secret, and only tell Europe once your planning is complete
- The new currency, in this case the drachma, should be introduced at parity with the euro
- Credit cards would be needed to fill the gap whilst sufficient supply of drachmas build up
- Wage indexation would be prohibited (why don’t they do this now?)
- The country’s national debt would be moved into the new currency
I have read some but not the whole report. I have also used a short article by Kathryn Hopkins of The Times, but it seems to me that the drachma would instantly go into freefall using this plan, the reason being that the Greek economy‘s cost of servicing its debts, whether in euros or in drachmas, is beyond the ability of both its economy and its taxpayers to sustain. It may well be able to effect an orderly exit from the eurozone, but the future beyond that looks unremittingly grim.