A precious comment from a valuable friend

Παρά το ότι διαφωνώ επί του πρακτέου και όχι επί της ουσίας, δηλαδή συμφωνώ με τις παθογένειες που περιγράφει ο φίλος μου αλλά συνεχίζω να ελπίζω ότι η λύση βρίσκεται μέσα στο ευρώ, δημοσιεύω με μεγάλη ευχαρίστηση το σχόλιο του σχετικά με τη λύση που προτείνει για την ελληνική κρίση.

Γράφει λοιπόν ο ML:

Defaulting on our debt and return to drachma is a very tough decision but will unfortunately be inevitable.

As you know very well, when you have a current account and budget deficit and more importantly an uncompetitive economy you can not gain much by devaluing your own currency. We don’t produce many things that people want to buy in the first place, so making our products cheaper will not lead to significantly higher exports and economic growth.

The key to our economy becoming viable again is to reform it, so that we can regain trust and attract the much needed foreign capital. In democracy, you can not reform your economy against the will of the people. It’s clear that Greek people do not trust the domestic politicians or their foreign creditors to manage this process.

Structural reforms can only be implemented and widely accepted when the society is faced with no other alternative (this was the case of Argentina or Island). If we find ourselves outside the Eurozone, with a currency that is devalued by at least 60% and very little foreign debt then we can start over from scratch and rebuild.

The adjustment process will be painful. You are looking at a significant loss in output (huge GDP contraction) an increase in unemployment, crime, etc. The process however will be short and cathartic. In 1-2 years we will start growing again, albeit from a very low base, restoring our credibility. I believe this way, in 10 years Greece will look much better compared to the slow death policy of the Troika that anyway leads to poverty without ensuring a substantial gain in competitiveness (slow pace or structural reforms, immigration, etc)

In simple language, we as a country suffer from cancer and we need to accept that we need strong chemotherapy to survive!!! That means that we will feel weak and ugly for a period of time but we will eventually survive. What we trying to do right now is cure cancer with antibiotics and keep complaining that too much medicine causes an upset stomach!!!!

ML