Would it be an advantage for Greece to solve the financial crisis by leaving the euro?



Would it be an advantage for Greece to solve the financial crisis by leaving the euro? Wouldn't be another way of shaping policy more helpful, like kind of a marshall plan instead of austerity?

Next sunday the population can take a vote on staying in the euro or leaving it.

Addition: Does it mean Greece will maybe leave only the 'curreny union' or do they decide to leave european union completly?

Sir Sy

Posted 2015-07-02T10:33:40.130

Reputation: 673

3No, there is no vote on staying in the euro or leaving it. Next sunday the population can take a vote on staying in the euro or leaving it.. That is incorrect. Next Sunday the population votes on troika proposals: Those citizens that reject the proposal of the three institutions vote 'Not approved/No'" and "Those citizens that agree with the proposal of the three institutions vote 'Approved/Yes'". (Wikipedia). – gerrit – 2015-07-02T13:53:54.470

1I'm afraid this is primary opinion based. Looking at the answers, one says yes and the other no, the third it's not the issue. So who knowns. – Bregalad – 2015-07-02T15:10:13.930

@bregalad, I think you are right. That's also one reason for asking this question. My purpose was to get some different views on the topic. – Sir Sy – 2015-07-02T15:39:46.317

@gerrit - While you're correct in that it isn't a vote on staying in the euro or not, the rest of your comment is very unclear. I assume that what you meant is that the population will vote on whether to accept this bailout or not, with one potential consequence of rejecting it to be leaving the euro. Quoting the text without explaining what "the proposal" entails isn't very clear. – Bobson – 2015-07-02T16:00:04.600

@Bobson I'm quoting the phrasing of the referendum (in translation). I agree that it is unclear. Please tell the Greek government. As to whether a eurozone exit is a possible consequence; the Greek government says it isn't, and the European Central Bank has stated that a Member State's expulsion from the EU or EMU, would be legally next to impossible. So in my view, politicians who say they will force Greece out are bluffing.

– gerrit – 2015-07-02T16:01:20.267

@gerrit - In context, it's relatively clear (although awkwardly worded). I figured it out with less than two minutes on the linked Wikipedia page. My point was that you should have paraphrased instead of quoting. – Bobson – 2015-07-02T16:03:57.193

@SirSy - I just voted to close as opinion-based, but it should be possible to rewrite this such that you're either asking for "what are the (potential) advantages?", which would be less ambiguous, or "what can Greece do?", which is a different, but related question. – Bobson – 2015-07-02T16:06:32.280

Does the Greek central bank even have a sufficient stock of Drachmas to use if they would or should not use Euros anymore? – Bregalad – 2015-07-02T17:18:32.373

@Bregalad Who knows what's going on behind the scenes at the moment. – gerrit – 2015-07-03T09:19:17.337

How do we determine what "Greece" is, if "Greece" even exists as a single body with singular interests, and how such a body would be "advantaged," given that Greek society is internally differentiated, for instance, by class. – Samuel Russell – 2015-07-05T06:53:31.513

AFAIK there is no legal way to leave the Euro. It may be possible to leave the Euro after a country leaves Europe. And no country can be "thrown out" of Europe or the Euro. See https://en.wikipedia.org/wiki/Greek_withdrawal_from_the_eurozone#Legality

– Martin Schröder – 2015-07-06T21:40:51.317



The way that Greece would benefit from leaving the Euro is that their currency could adjust to a low value relative to the Euro. This would make tourism and Greek exports cheap stimulating their economy. The same thing could happen if they stayed with the Euro, but it would require most of the country to take further pay cuts which would be tricky to negotiate. This would also benefit Europe as they would have access to more inexpensive goods and services.

The costs of switching currencies for any foreigners doing business are an obvious downside. Inflation is also a potential downside if the Greek government tries to print its way out of debt with its new currency.

The difficulty with the 'Marshal Plan' approach is that who will pay for it? Many Europeans and Americans while not wholly unsympathetic think that the Greek crisis was caused by the Greek government's irresponsible spending and refusal to prosecute rampant tax evasion. I don't think there's public will to sacrifice much more treasure for Greece.


Posted 2015-07-02T10:33:40.130

Reputation: 10 254

"The same thing could happen if they stayed with the euro" not exactly for a few reasons: first a currency devaluation adjusts all prices in the country (including wages and rentals) all at once, in a few hours or days at most, while an internal devaluation would take years and may not work because of Keynesian demand-side depressing effects (zero lower bound and all that) or to put it differently the real exchange rate of an independent currency is flexible, while the real exchange rate of an irremediably-tide currency is extremely rigid on a years-scale. – PatrickT – 2016-06-25T18:53:59.563

If Greece leaves the euro, it will have no need for inflation to reduce the real value of its debt since the depreciation will have taken care of that (most of the debt is external), but it could very well get it anyway (if pre-euro history is any indication of a potential future). – PatrickT – 2016-06-25T18:57:48.083


Leaving the euro would be a good thing for Greece, who would then have control over their own currency so they can inflate away some of their currency problems. There is some danger in doing this though in ending up in a hyper inflation scenario which could take Greece decades to solve. No matter what Greece will still have to implement some austerity measures because it was the spending that got them into this mess and if they don't stop it or slow it down nothing will change.

The real problem if Greece leaves the euro is the damage it will cause to the rest of the EU still using the euro. Since it sets the precedent that any euro debt will not actually be backed by the EU and any individual country could drop out and repay their debt using a worthless currency, this will hurt the euro as a long term investment platform.

Greece leaving just he Euro would be more beneficial that leaving the entire EU, but that may not be up to them, the other EU countries may seek to remove them for the damage their actions will cause. Greece will likely see mass emigration as they deal with their debt, and remaining part of the EU will make it easier for Greeks to migrate further straining neighboring countries. No matter what Greece decides to do things are likely to get a lot worse before they get any better.


Posted 2015-07-02T10:33:40.130

Reputation: 11 895

If Greece leaves its currency collapses and its debt problem is solved, no need for inflation and even less need for austerity measures (of the kind in place now). – PatrickT – 2016-06-25T18:59:33.857


"An advantage" seems to be a very vague term. There are too many factors and too many acting parties. Off the top of my mind:

  • Paying off the overdue bills. On Tuesday, June/30, Greece failed to pay €1.5bn to IMF.
    Leaving Eurozone would not cancel neither the loan body nor the interest rates nor the penalties;
  • Credit ratings. At the moment the sovereign ratings of Greece are: CC (Fitch), CCC- (S&P).
    Leving Eurozone will, at minimum, slow down the terms of recovery since it would upset financial markets, create uncertainty for other lenders, and generally crimp economic activity.
  • Unemployment rate. 25% of unemployment is really a disaster. However, it seems to be not because of there's no job to do. Ridiculous, populist bonuses to the employees and unsustainable pension system (The Guardian, 2015) are the factors to be changed.

    On Planet Greece, some civil servants get a bonus for turning up to work on time. Foresters get a bonus for working outdoors. At least they show up. […] and that includes the committee to manage a lake that dried up 80 years ago.
    Unmarried and divorced daughters of civil servants are entitled to collect their dead parents pensions.BBC News, 2010

    Some of the most vivid expenses seem to be cut under the terms of the bailout:

    Greek civil servants stand to lose the six extra days of paid vacation they get each year—just for using a computer […]
    It [the government of Greece] has already limited the pensions that unmarried daughters are allowed to collect when their father dies, and scrapped a bonus for showing up to work on time. It has also extended the work week for teachers.Wall Street Journal, 2013

    Leaving the Eurozone would not cancel the expenses and, most likely, will postpone any social reforms.

  • Debt to GDP rate. In 2014, Greece recorded a Government Debt of a whopping 177% of the country's GDP.
    Leaving the Eurozone will certainly reduce willingness of creditors to loan further money. Combined with some rate of returning the loans, it will reduce the absolute amount of debts, but this would hardly encourage their economy to grow.

  • Keeping the existing gov't in power. The Greek economy is built on a principle of economic populism. If the principles of populist economy changed, the current government risks to be overthrown due to social unrest.
    Leaving Eurozone will let the government to keep the existing policy, so yes, it will be a benefit for the government.

TL;DR. Staying in Eurozone or leaving it is or is not a benefit for different social groups in Greece.

Leaving it most likely would help Tsipras to be in power till the economy totally collapses.

Staying in Eurozone requires unpopular changes in social welfare plus a tight schedule of repayment the loans, so it will produce some social unrest. However, this would keep the economy from collapsing.


Posted 2015-07-02T10:33:40.130

Reputation: 10 763

4I do not trust Bild as a reliable source on the situation in Greece. – gerrit – 2015-07-02T15:45:38.440

1(-1) This appears to be little more than rumor-mongering and totally fails to offer any sort of serious economic analysis. As an example, one basic mistake: The current debt-to-GDP ratio is a direct result of the austerity of the last years and that austerity was real and severe. That's not to say there weren't serious problems before or any obvious solution that would have been accepted by the other players but this does mean that the current situation can't be simply explained by the “Greeks are lazy and paid too much” cliché and that further austerity isn't going to help any time soon. – Relaxed – 2015-07-02T16:04:25.420

@Relaxed, the economic analysis and specific investors' demands are off topic the question. One may find them, for example, here. Also, the question is not about "“Greeks are lazy". It's about whether or not leaving the Eurozone "benefit" someone.

– bytebuster – 2015-07-02T16:18:50.347

@bytebuster Oh, but you did offer economic analysis, just not the serious kind. Also nobody is “investing” in anything in this story, stop using that word inappropriately. – Relaxed – 2015-07-02T16:22:05.977

It's better but “ridiculous, populist bonuses to the employees” is still bad analysis (and a very bold statement if your intent is to present key facts without getting into economics!). The Greek economy is depressed, there are in fact “no job to do”. Many details would be necessary to tear this apart but the wages and number of employees in the public sector (purportedly the main source of the current problems) have been slashed without bringing about the promised growth. It was debatable in 2010 but just isn't credible now, whatever else you might say about what should be done or not. – Relaxed – 2015-07-02T16:49:04.643

@gerrit, Your're right, thanks. links to BBC News, The Guardian, and WSJ look better here. – bytebuster – 2015-07-02T18:23:31.657

@Relaxed, this post does not claim to be any kind of analysis. I guess the OP did not request for it. – bytebuster – 2015-07-02T18:23:58.553

@bytebuster and yet that's exactly what you are doing. If you don't want to be held accountable for it, remove the ludicrous claim that some strange sounding bonuses "put the economy to its knees". Even when backed up by seemingly more serious publications than Bild, it's still mostly cheap fun with no relation to what actually happened in the last 5 years and a very bad analysis. – Relaxed – 2015-07-02T19:46:36.987