For years I’ve been arguing that Greece should exit the Euro. Partly, this is axiomatic for me. A shared currency was always a bad idea. And the way it has played out is that Germany — as the dominant economy on the Euro — has almost total power. And Germany — as it has for the last hundred years and more — has abused that power. It’s nothing personal against the Germans. Truthfully, I just assume that the Germans will act like Americans and I’m never disappointed — which is to say that I am always disappointed but never surprised.
So I have never thought that Greece would get a fair deal. It’s really simple: the Greek government screwed up. Unlike the other European countries that got into trouble, it was culpable. And given that, Germany and the other countries were going to have to show Greece mercy. Fat chance with that. So I always thought that it was a matter of Greece exiting the Euro early or exiting it late. And once you conclude that, it really doesn’t make much sense to torture yourself for years while putting off the inevitable. If Greece had exited in 2010, it would have taken a year or two to get back on its feet. If it does it now, it will take a year or two to get back on its feet.
Matt Yglesias, surprisingly, thinks that Greece doesn’t have much bargaining power right now, Greece Is in Crisis (Again), and Here’s What You Need to Know. He argued that if Greece exits the Euro, it would actually hurt the moderate parties in the rest of Europe. But why does that matter to Greece? This should be the great concern for the European establishment. If Greece exits the Euro and manages to do well within a couple of years, this will embolden more extreme parties in other countries. Many of those parties are not too nice. That provides a great deal of incentive to the rest of Europe, if only it were worried about, you know, World War III as much as it was worried about bankers losing a bit of money.
Yglesias has an answer to my concern, by responding to — of all people — Josh Barro. Barro has been saying the same things I have, “Doesn’t Greece need to leave the Euro for the same reason everyone needed to leave the gold standard in the 1930s?” Yes, it does! It needs to lower the value of its currency. And, “I get it: transitioning off the Euro would be very very painful. But not transitioning off also looks very very painful!” But Yglesias’ response to this again makes me scratch my head. He puts forth the European project as one to minimize conflict — to avoid World War III, if you like. And he noted Greece had previously been mired in civil war. But again I say: isn’t this a bigger issue to Europe than to Greece? Isn’t this the reason that the Germany and the rest should really want to make a deal with Greece?
Yglesias does mention an idea for keeping Greece in the EU that was proposed by Wolfgang Münchau. It sounds reasonable. But then most of what Greece has proposed has sounded reasonable. It doesn’t seem to me that it has been Greece that has stood in the way of a deal. If Münchau’s idea was reasonable, why didn’t the more experienced bureaucrats of the EU push it? I think the reason is clear enough. The European Union Commission is really not interested in doing what is best for the people of the EU. They are focused on the interests of the power elite. And like such people everywhere, they have pushed their financial interests to the point where they may end up hurting themselves.