Who says Greece needs to stay in the eurozone?
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Another day, another Greek drama. Later today the Greek government is scheduled to put out its budget for 2013. It’s almost certain to include billions in unpopular and controversial cuts as the country tries to meet the conditions imposed by its creditors elsewhere in Europe. Reportedly, the budget will presume a Greek economy that shrinks up to 4 percent — the sixth year in a row of recession.
The announcement of a new budget comes amid an enormous effort that’s underway to keep Greece and other struggling European countries on the euro currency. But some say it’s time to let Greece go. One of those proponents is Jack Goldstone, a professor of public policy and senior fellow at the Mercatus Center at George Mason University.
“Greece is like a homeowner who is way underwater on their mortgage. They just owe so much money that the prospect of being able to repay it seems very distant to me,” he says.
Goldstone argues that other nations in the eurozone shouldn’t let Greece just throw away the keys and run off in an uncontrolled manner. That would be a disaster, he says. However, he doesn’t think that’s the only way out.
“I do think it’s possible to do a managed exit of Greece from the euro currency zone without leaving the European Union — and perhaps with even plans to return to the currency once they get their fiscal house in order,” he says.
Goldstone believes that Greece is not earning enough money because all of their goods and services are priced at the euro, which means they are not competitive with productivity so low. He argues that if Greece were to pull out of the euro, it would create an initial shock, but ultimately lower the price of goods and services and make it competitive — eventually earning more money with a devalued currency.
“Greece is in by far the worst situation of any of the countries in the eurozone and that’s why I think they might need this kind of special course,” he says.