How to Leave the Euro!!!!

By STERGIOS SKAPERDAS
HAVING been led down an ever-worsening spiral by the euro zone and its own government, Greece now faces two options, both of them painful: stay the course, or default and exit the monetary union.

Each presents difficulties and uncertainties, but in the long run there is no question that default, and a return to the drachma, offer the better chance of economic growth and employment.

Staying the course — which, despite the impending change of government, is still Greece’s plan — means continuing austerity and unemployment for the foreseeable future. The young and skilled will go abroad, leaving behind an older, less productive and needier population to endure a crushing debt. In the meantime, all important economic decisions will be made in Paris, Berlin and Brussels.

Default at Greece’s initiative, by contrast, would allow Greece to influence its destiny. The process would be largely governed by Greek law, instead of its being a matter of private discussions between the German chancellor and the French president, and would thus lead to a more sustainable debt burden.

Because of problems with financing Greek banks and pension funds, default would be likely to mean leaving the euro. But that’s a good thing, as it would give Greece control of its own monetary policy. This is especially important now, with Greek credit and liquidity severely restricted, most critically in its vital small-business sector. Moreover, since the “new drachma,” as the post-euro currency might be called, would depreciate, both tourism and exports would rise, and imports decrease, all of which would make Greece more competitive.

So why have Greek leaders stuck with the euro at all? In part, it’s because the thought of defaulting and leaving the euro after nearly a decade is so intimidating. But while not without costs, it would in fact be relatively straightforward, especially if preparation is underway behind the scenes.

To minimize the number of days banks would need to be closed, the decision to move to the new drachma should be made on a Friday. Bank deposits and domestic debt would be immediately converted to new drachmas at the initial exchange rate. It would fall to the Greek courts to determine whether pre-2010 public debt would follow suit, but there is no reason to think they would treat it any differently from domestic debt.

Loans from the European Union and the International Monetary Fund, though, would probably be kept in euros. That’s a problem, because once Greece leaves, the euro itself would substantially increase in value — and thus the loans’ price in drachmas would increase. But since incomes would also drop if the country stayed in the euro zone, the real, productive resources the country would need to service that debt wouldn’t be much different.

Apart from these steps, the transition would take time. It could take perhaps months to print enough new drachmas to support domestic transactions, and during that time euros would stay in circulation. Banks would also need time to adjust their accounting, computers and clearing routines. Still, a few distinctive details of the euro aside, managing the transition from one currency to another is well understood: the change of currencies that followed the breakup of Czechoslovakia, for example, took several weeks and by all accounts went well.

True, such a move would close off access to international bond markets, making bilateral borrowing from another country Greece’s only option abroad. But this is less a concern than some think, because Greece is soon expected to achieve a primary budget surplus (the government budget surplus, excluding interest on debt) which would make domestic borrowing sufficient.

Initially, foreign exchange would be scarce, making it harder to import essential goods. In the short term, then, Greece would need to limit the outflow of foreign capital, an aggressive but not uncommon practice. The private, euro-denominated external debt of banks and other companies would also need support through government guarantees.

Some of these steps may seem daunting, but they are not much different from what Greece faced before its adoption of the euro. In any case, the policies followed so far have demonstrably failed. Greece must contemplate, and then undertake, an exit from the euro zone. The sooner a transition occurs, the better for everyone.

Stergios Skaperdas is a professor of economics at the University of California, Irvine.

Works


Download all references for this author: available formats: HTML (with abstracts), plain text (with abstracts), BibTeX, RIS (EndNote), ReDIF

Working papers

  1. Stergios Skaperdas, 2011. "Seven Myths about the Greek Debt Crisis," Working Papers 111201, University of California-Irvine, Department of Economics.
  2. Michelle R. Garfinkel & Michael McBride & Stergios Skaperdas, 2011. "Governance and Norms as Determinants of Arming," Working Papers 111203, University of California-Irvine, Department of Economics.
  3. Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2011. "Trade and Insecure Resources: Implications for Welfare and Comparative Advantage," Working Papers 111201, University of California-Irvine, Department of Economics.
  4. Hao Jia & Stergios Skaperdas, 2011. "Technologies of Conflict," Working Papers 101111, University of California-Irvine, Department of Economics.
  5. Stergios Skaperdas, 2011. "Policymaking in the Eurozone and the Core Vs. Perifphery Problem," Working Papers 101112, University of California-Irvine, Department of Economics.
  6. Stergios Skaperdas, 2011. "Proprietary Public Finance: On its Emergence and Evolution out of Anarchy," CESifo Working Paper Series 3495, CESifo Group Munich.
  7. Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2010. "Trade in the Shadow of Power," Working Papers 101105, University of California-Irvine, Department of Economics, revised Jan 2011.
  8. Stergios Skaperdas, 2009. "The Costs of Organized Violence: A Review of the Evidence," Working Papers 080924, University of California-Irvine, Department of Economics.
  9. Michael McBride & Stergios Skaperdas, 2009. "Conflict, Settlement, and the Shadow of the Future," Working Papers 080922, University of California-Irvine, Department of Economics.
  10. Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2009. "International Trade and Transnational Insecurity: How Comparative Advantage and Power are Jointly Determined," Working Papers 080921, University of California-Irvine, Department of Economics.
  11. Michael McBride & Gary Milante & Stergios Skaperdas, 2009. "Peace and War with Endogenous State Capacity," Working Papers 091002, University of California-Irvine, Department of Economics.
  12. Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2008. "Globalization and Insecurity: Reviewing Some Basic Issues," Working Papers 080901, University of California-Irvine, Department of Economics.
  13. Jose Luis Evia & Roberto Laserna & Stergios Skaperdas, 2008. "Socio-Political Conflict and Eonomic Performance in Bolivia," Working Papers 070814, University of California-Irvine, Department of Economics.
  14. Vimal Kumar & Stergios Skaperdas, 2008. "On The Economics oF Organized Crime," Working Papers 070815, University of California-Irvine, Department of Economics.
  15. Stergios Skaperdas, 2007. "An Economic Approach to Analyzing Civil War," Working Papers 060715, University of California-Irvine, Department of Economics.
  16. Stergios Skaperdas & Samarth Vaidya, 2007. "Persuasion as a Contest," Working Papers 070809, University of California-Irvine, Department of Economics.
  17. Stergios Skaperdas, 2006. "Bargaining Versus Fighting," Working Papers 060705, University of California-Irvine, Department of Economics.
  18. Michelle R. Garfinkel & Stergios Skaperdas, 2006. "Economics of Conflict: An Overview," Working Papers 050623, University of California-Irvine, Department of Economics, revised Sep 2006.
  19. Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2005. "Globalization and Domestic Conflict," International Trade 0507005, EconWPA.
  20. Michael McBride & Stergios Skaperdas, 2005. "Explaining Conflict in Low-Income Countries: Incomplete Contracting in the Shadow of the Future," CESifo Working Paper Series 1636, CESifo Group Munich.
  21. Konrad, Kai A & Skaperdas, Stergios, 2005. "Succession Rules and Leadership Rents," CEPR Discussion Papers 5206, C.E.P.R. Discussion Papers.
  22. Stergios Skaperdas, 2003. "Restraining the Genuine Homo Economicus: Why the Economy Cannot be Divorced from its Governance," CESifo Working Paper Series 901, CESifo Group Munich.
  23. Ramon Castillo & Stergios Skaperdas, 2003. "All in the Family or Public? Law and Appropriative Costs as Determinants of Ownership Structure," CESifo Working Paper Series 921, CESifo Group Munich.
  24. Alexander R. W. Robson & Stergios Skaperdas, 2002. "Costly Enforcement of Property Rights and the Coase Theorem," CESifo Working Paper Series 762, CESifo Group Munich.
  25. Michelle R Garfinkel & Stergios Skaperdas, 2001. "Conflict Without Misperceptions or Incomplete Information: How the Future Matters," Levine's Working Paper Archive 563824000000000011, David K. Levine.
  26. Genicot, C. & Skaperdas, S., 2000. "Investing in Confict Management," Papers 00-01-17, California Irvine - School of Social Sciences.
  27. Skaperdas, S., 2000. "Warlord Competition," Papers 00-01-20, California Irvine - School of Social Sciences.
  28. Skaperdas, S. & Syropoulos, C., 2000. "Guns, Butter, and Openness: On The Relationship Between Security and Trade," Papers 00-01-23, California Irvine - School of Social Sciences.
  29. Skaperdas, S., 2000. "Turning 'Citizens' into 'Consumers:' Economic Growth and the Level of Public Discourse," Papers 00-01-18, California Irvine - School of Social Sciences.
  30. Garfinkel, M.R. & Skaperdas, S., 2000. "Contract or War? On the Consequences of a Broader View of Self-Interest in Economics," Papers 99-00-12, California Irvine - School of Social Sciences.
  31. Anbarci, N. & Skaperdas, S. & Syropoulos, C., 2000. "Comparing Bargaining Solutions in the Shadow of Conflict: How Norms Against Threats Can Have Real Effects," Papers 00-01-19, California Irvine - School of Social Sciences.
  32. Anbarci, N. & Skaperdas, S. & Syropoulos, C., 1999. ""Do Norms Against Threats have Real Effects? Comparing Bargaining Solutions in the Shadow of Conflict"," Papers 98-99-11, California Irvine - School of Social Sciences.
  33. Skaperdas, S., 1999. "On the Political Economy of Organized Crime Is There Much That Can Be Done?," Papers 99-00-07, California Irvine - School of Social Sciences.
  34. Konrad, Kai A & Skaperdas, Stergios, 1999. "The Market for Protection and the Origin of the State," CEPR Discussion Papers 2173, C.E.P.R. Discussion Papers.
  35. Skaperdas, S. & Syropoulos, C., 1998. "Complementarity in Contests," Papers 97-98-21, California Irvine - School of Social Sciences.
  36. Lee, J. & Skaperdas, S., 1998. "Workshops or Barracks? Productive versus Enforcive Investment and Economic Performance," Papers 97-98-20, California Irvine - School of Social Sciences.
  37. Skaperdas, S. & Syropoulos, C., 1996. "Insecure Properties and the Stability of Exchange," Papers 95-96-8, California Irvine - School of Social Sciences.
  38. Skaperdas, S. & Syropoulos, C., 1993. "Gangs as Primitive States," Papers 92-93-02, California Irvine - School of Social Sciences.
  39. Skaperdas, S., 1991. "Self-Protection and Bankruptcy," Papers 90-92-11, California Irvine - School of Social Sciences.
  40. Skaperdas, S., 1991. "Coalition Formation as a Contest: Introduction and Application to the Three-Player Case," Papers 90-92-08, California Irvine - School of Social Sciences.
  41. Skaperdas, S. & Syropoulos, C., 1991. ""The Shadow of the Future": Can it Harm Cooperation?," Papers 12-91-2, Pennsylvania State - Department of Economics.
  42. Skaperdas, S. & Syropoulos, C., 1991. "The Distribution of Income in the Presence of Directly Unproductive Activities," Papers 12-91-3, Pennsylvania State - Department of Economics.
  43. Skaperdas, S., 1991. "Cooperation, Conflict And Power In The Absence Of Property Rights," Papers 90-91-06a, California Irvine - School of Social Sciences.
  44. Skaperdas, S. & Syropoulos, C., 1991. "The Distribution of Income in the Presence of Directly Unproductive," Papers 90-92-10, California Irvine - School of Social Sciences.
  45. Skaperdas, S., 1990. "Conflict And Attitudes Toward Risk," Papers 90-91-05, California Irvine - School of Social Sciences.

Articles

  1. Michael McBride & Gary Milante & Stergios Skaperdas, 2011. "Peace and War With Endogenous State Capacity," Journal of Conflict Resolution, Peace Science Society (International), vol. 55(3), pages 446-468, June.
  2. Stergios Skaperdas, 2011. "Policymaking in the Eurozone and the Core vs Periphery Problem," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 12(2), pages 12-18, 07.
  3. Stergios Skaperdas, 2011. "The costs of organized violence: a review of the evidence," Economics of Governance, Springer, vol. 12(1), pages 1-23, March.
  4. Johannes Münster & Stergios Skaperdas, 2010. "Introduction," Economics of Governance, Springer, vol. 11(2), pages 101-101, April.
  5. Garfinkel, Michelle R. & Skaperdas, Stergios & Syropoulos, Constantinos, 2008. "Globalization and domestic conflict," Journal of International Economics, Elsevier, vol. 76(2), pages 296-308, December.
  6. Alex Robson & Stergios Skaperdas, 2008. "Costly enforcement of property rights and the Coase theorem," Economic Theory, Springer, vol. 36(1), pages 109-128, July.
  7. Stergios Skaperdas, 2008. "An economic approach to analyzing civil wars," Economics of Governance, Springer, vol. 9(1), pages 25-44, January.
  8. Stergios Skaperdas, 2006. "Bargaining Versus Fighting," Defence and Peace Economics, Taylor and Francis Journals, vol. 17(6), pages 657-676.
  9. Ramon Castillo & Stergios Skaperdas, 2005. "All in the family or public? Law and appropriative costs as determinants of ownership structure," Economics of Governance, Springer, vol. 6(2), pages 93-104, 07.
  10. Stergios Skaperdas, 2003. "Restraining the Genuine Homo Economicus: Why the Economy Cannot Be Divorced from Its Governance," Economics and Politics, Wiley Blackwell, vol. 15(2), pages 135-162, 07.
  11. Stergios Skaperdas & Constantinos Syropoulos, 2002. "Insecure Property and the Efficiency of Exchange," Economic Journal, Royal Economic Society, vol. 112(476), pages 133-146, January.
  12. Anbarci, Nejat & Skaperdas, Stergios & Syropoulos, Constantinos, 2002. "Comparing Bargaining Solutions in the Shadow of Conflict: How Norms against Threats Can Have Real Effects," Journal of Economic Theory, Elsevier, vol. 106(1), pages 1-16, September.
  13. Stergios Skaperdas, 2001. "The political economy of organized crime: providing protection when the state does not," Economics of Governance, Springer, vol. 2(3), pages 173-202, November.
  14. Stergios Skaperdas & Constantinos Syropoulos, 2001. "Guns, Butter, and Openness: On the Relationship between Security and Trade," American Economic Review, American Economic Association, vol. 91(2), pages 353-357, May.
  15. Konrad, Kai A & Skaperdas, Stergios, 1998. "Extortion," Economica, London School of Economics and Political Science, vol. 65(260), pages 461-77, November.
  16. Skaperdas, Stergios & Syropoulos, Constantinos, 1998. "Complementarity in contests," European Journal of Political Economy, Elsevier, vol. 14(4), pages 667-684, November.
  17. Skaperdas, Stergios, 1998. " On the Formation of Alliances in Conflict and Contests," Public Choice, Springer, vol. 96(1-2), pages 25-42, July.
  18. Skaperdas, Stergios & Syropoulos, Constantinos, 1997. "The Distribution of Income in the Presence of Appropriative Activities," Economica, London School of Economics and Political Science, vol. 64(253), pages 101-17, February.
  19. Konrad, Kai A. & Skaperdas, Stergios, 1997. "Credible threats in extortion," Journal of Economic Behavior & Organization, Elsevier, vol. 33(1), pages 23-39, May.
  20. Kai A.Konrad & Stergios Skaperdas, 1997. "Backing up Words with Deeds: Information and punishment in organized crime," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 24, pages 51-63.
  21. Skaperdas, Stergios & Syropoulos, Constantinos, 1996. "Can the shadow of the future harm cooperation?," Journal of Economic Behavior & Organization, Elsevier, vol. 29(3), pages 355-372, May.
  22. Stergios Skaperdas & Constantinos Syropoulos, 1996. "On the Effects of Insecure Property," Canadian Journal of Economics, Canadian Economics Association, vol. 29(s1), pages 622-26, April.
  23. Skaperdas, Stergios, 1996. "Contest Success Functions," Economic Theory, Springer, vol. 7(2), pages 283-90, February.
  24. Skaperdas, Stergios & Gan, Li, 1995. "Risk Aversion in Contests," Economic Journal, Royal Economic Society, vol. 105(431), pages 951-62, July.
  25. Kai A. Konrad & Stergios Skaperdas, 1993. "Self-Insurance and Self-Protection: A Nonexpected Utility Analysis," The Geneva Risk and Insurance Review, Palgrave Macmillan, vol. 18(2), pages 131-146, December.
  26. Skaperdas, Stergios, 1992. "Cooperation, Conflict, and Power in the Absence of Property Rights," American Economic Review, American Economic Association, vol. 82(4), pages 720-39, September.
  27. Skaperdas, Stergios, 1991. "Conflict and Attitudes toward Risk," American Economic Review, American Economic Association, vol. 81(2), pages 116-20, May.

Chapters

  1. Garfinkel, Michelle R. & Skaperdas, Stergios, 2007. "Economics of Conflict: An Overview," Handbook of Defense Economics, Elsevier.

Books

  1. Garfinkel, Michelle R. & Skaperdas, Stergios (ed.), 2012. "The Oxford Handbook of the Economics of Peace and Conflict," OUP Catalogue, Oxford University Press, number 9780195392777.
  2. Garfinkel,Michelle R. & Skaperdas,Stergios (ed.), 2008. "The Political Economy of Conflict and Appropriation," Cambridge Books, Cambridge University Press, number 9780521088268.
  3. Garfinkel,Michelle R. & Skaperdas,Stergios (ed.), 1996. "The Political Economy of Conflict and Appropriation," Cambridge Books, Cambridge University Press, number 9780521560634.

NEP Fields

29 papers by this author were announced in NEP, and specifically in the following field reports (number of papers):
  1. NEP-AFR: Africa (3) 2005-08-13 2006-07-21 2006-09-03
  2. NEP-AGR: Agricultural Economics (1) 2011-11-07
  3. NEP-CBA: Central Banking (1) 2011-07-13
  4. NEP-CDM: Collective Decision-Making (1) 2005-10-04
  5. NEP-DEV: Development (2) 2006-01-29 2008-03-08
  6. NEP-EEC: European Economics (1) 2011-11-07
  7. NEP-EVO: Evolutionary Economics (1) 2004-05-02
  8. NEP-EXP: Experimental Economics (1) 2009-06-03
  9. NEP-GTH: Game Theory (3) 2006-10-28 2008-01-05 2009-06-03
  10. NEP-HIS: Business, Economic & Financial History (1) 2007-04-21
  11. NEP-HPE: History & Philosophy of Economics (1) 2004-05-02
  12. NEP-INT: International Trade (4) 2005-08-13 2005-08-13 2010-11-13 2011-11-07
  13. NEP-LAW: Law & Economics (2) 2005-08-13 2008-03-08
  14. NEP-MIC: Microeconomics (1) 2005-10-04
  15. NEP-MKT: Marketing (1) 2008-01-05
  16. NEP-PBE: Public Economics (2) 2005-10-04 2005-12-09
  17. NEP-POL: Positive Political Economics (6) 2001-11-21 2005-10-04 2005-10-04 2006-09-03 2006-09-03 2009-06-03 Author is listed
  18. NEP-SOC: Social Norms & Social Capital (2) 2006-09-03 2008-03-08

Statistics

Most cited item

Most downloaded item (past 12 months)


Αναρτήθηκε από

Δεν υπάρχουν σχόλια:

Δημοσίευση σχολίου

Εγγραφή σε: Σχόλια ανάρτησης (Atom)