EU: Will Greece drag the euro down with it?
While dumping Greece might be unavoidable, the consequences for the European Union could be disastrous.
“We may have to buy drachmas for our next Greek vacation,” said Martin Jasminsky in Hospodarske Noviny (Czech Republic). Greece’s failure to form a government out of the squabbling mess of fringe parties it elected to parliament this month means that another round of elections is in store—and the markets have lost confidence that the country will ever get its financial house in order. Even though all the EU finance ministers publicly said this week that Greece should stay in the euro zone, privately they are all murmuring that jettisoning Greece might be unavoidable. “The politicians are now thinking much more about how to deal with the consequences for Spain, Italy, and Portugal than about keeping Athens in the monetary union.”
The consequences of a Greek exit could be disastrous, said Bruno Proença in Diário Económico (Portugal). Without Greece on its books, the EU just might have the resources to protect the rest of its struggling southern economies. More likely, though, “we would experience a domino effect that would put paid to the euro for good.” Even if the euro were to survive, a Greek exit would be bad for European security, said José Ignacio Torreblanca in El País (Spain). Cut off from EU trade, Greece would sink into extremism and poverty and turn against NATO, paving the way for “increased tension” with Turkey and a new failed state on Europe’s southern border.
Greece is already turning toward extremism, said Der Spiegel (Germany) in an editorial. Look at the latest elections: Far-right and far-left parties that opposed austerity gained, while centrists were hammered. It looks a lot like “Germany in the 1920s, during the Weimar Republic,” when Germans were so fed up with austerity that they turned to the Nazis. But Greeks can avoid such a “shameful” fate by turning back to their own currency. They could then devalue the drachma, making imports more expensive and exports cheaper, and spurring production and employment at home. This would not amount to being drummed out of the EU. “Solidarity among European countries is not tied to membership of the euro,” and other countries, including Germany, would certainly “help Greece with its huge debts.”
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
The good-bye would be painful at first, said Arvind Subramanian in the Financial Times. There would be a long period of financial chaos, while all contracts were rewritten in drachmas. “Most politically devastating, fiscal austerity might actually need to intensify” at first, since Greece would find itself without the money from Europe and the IMF flowing in. But ultimately, the devalued currency would reorient the economy, and “Greek growth would probably surge.” It could even soar enough to make Spain and other troubled countries want to unshackle themselves from the euro, too.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Create an account with the same email registered to your subscription to unlock access.
-
Arizona court reinstates 1864 abortion ban
Speed Read The law makes all abortions illegal in the state except to save the mother's life
By Rafi Schwartz, The Week US Published
-
Trump, billions richer, is selling Bibles
Speed Read The former president is hawking a $60 "God Bless the USA Bible"
By Peter Weber, The Week US Published
-
The debate about Biden's age and mental fitness
In Depth Some critics argue Biden is too old to run again. Does the argument have merit?
By Grayson Quay Published
-
How would a second Trump presidency affect Britain?
Today's Big Question Re-election of Republican frontrunner could threaten UK security, warns former head of secret service
By Harriet Marsden, The Week UK Published
-
'Rwanda plan is less a deterrent and more a bluff'
Instant Opinion Opinion, comment and editorials of the day
By The Week UK Published
-
Henry Kissinger dies aged 100: a complicated legacy?
Talking Point Top US diplomat and Nobel Peace Prize winner remembered as both foreign policy genius and war criminal
By Harriet Marsden, The Week UK Last updated
-
Trump’s rhetoric: a shift to 'straight-up Nazi talk'
Why everyone's talking about Would-be president's sinister language is backed by an incendiary policy agenda, say commentators
By The Week UK Published
-
More covfefe: is the world ready for a second Donald Trump presidency?
Today's Big Question Republican's re-election would be a 'nightmare' scenario for Europe, Ukraine and the West
By Sorcha Bradley, The Week UK Published