Richard Barwell, A Eurozone Without Greece – It’s time to think more seriously about this possibility, Wall Street Journal, 01 April 2015.
The 24-hour news cycle is causing a cacophony of speculation about Greece leaving the euro, the so-called Grexit. Amid all the arguments about whether Greece will or should exit, there has been a lot less thought given to what would happen if Greece does return to the drachma. It’s time to think more seriously about this possibility.
A Greek exit would have far-reaching consequences for the eurozone, weakening the ties that bind the single currency together in some respects, strengthening them in others. On balance the latter will probably dominate, reducing the chance that other countries leave. If Greece leaves the eurozone, it would create a number of precedents that would influence how people vote and politicians behave elsewhere in Europe.
If the Greek people choose to leave in a referendum, they will send a powerful signal that they, and not the central bankers, officials and politicians in Frankfurt, Brussels and Berlin hold the destiny of the euro in their hands. But if it’s the Greek politicians who make the decision to leave, based on an electoral mandate rather than a referendum, that could make voters elsewhere think twice before voting for antiausterity candidates.
- Codogno, L. & De Grauwe, P. (2015) “Both Greece and its creditors must compromise to prevent the risk of a Grexit“, LSE EUROPP, 26 March.
- Gros, Daniel, (2015), “Grexit 2015: A primer”, CEPS Commentaries, 23 January.
- Darvas, Z. & Hüttl, P. (2015) “Why a Grexit is more costly for Germany than a default inside the euro area – Contrary to the IFO institute, we conclude that German losses on both official and private claims would be much higher if Greece exits the euro“, Bruegel Institute, 16 January.