1. Better for everyone if Greek is out of the Euro (actually even better if out of EU though this is not something either Europe or Greece wants)
2. IMHO Papandreou was a courageous leader and did the right thing.
- a) He was elected and entitled to make most decision for his people, but he knows this is a decision much more important and he wants to make sure his people agrees. This is what A RESPONSIBLE DEMOCRATICALLY ELECTED LEADER SHOULD DO. For this I have difficulty understanding why some people have been blaming him for being irresponsible.
- b) By throwing the question open he can assure the support of his people, (and/or the opposition) to support the terms of the deal. This is better for everyone, Greece or EU, going forward. This is also what a responsible member in EU should do, making sure himself and his successor(s) will keep to the words
3. For how the Greek to leave the Euro (and the mechanisms) see the Economist report below. It is doable.
However, an alternative is for Greece to re-launch the drachma gradually, (while keeping the Euro). e.g. having a dual currency first, with a fixed (or floating exchange rate), like what is happening in some tourists locations (such as Angkor in Cambodia) today, or that of China in the 1980s.
This way Greece will not have to be out of the Euro right away, both preserving the Euro integrity (sort of), and its EU membership. (Greece has already violated all the fiscal requirements anyway, so launching a dual currency adds little damage to the situation today)
In the market both currencies are legal tenders, while most government payments, especially wages for the public sectors will be denominated at the new drachma (eg 1 Euro = 1 Drachma, or 340 Drachma today, but the rate will float afterwards). This is not a prefect solution. But it allows for a continuous adjustment, which can be up or down depending on how the Greek economy goes. It basically achieves all the fiscal terms imposed by the EU, without causing as much disruption domestically
1) The Economist: The barriers to leaving are high but could still be crawled over by a country determined to leave
2) NYT 1998: Joining Euro A Dim Hope For Greece
3) Will Greece Pull an Iceland?
Breaking up the euro area
How to resign from the club
The barriers to leaving are high but could still be crawled over by a country determined to leave
Dec 2nd 2010 | from the print edition
MEMBERSHIP of the euro is meant to be for keeps. Europe’s currency union is supposed to be immune from the sort of speculative attack that cracked the exchange-rate mechanism, the system of currency pegs that preceded it, in 1992-93. A lesson from that time is that when the foreign-exchange markets are far keener on one currency than another, even the stoutest official defence of a peg between the two can be broken. Inside the euro zone, no one can be forced to devalue because no one has a currency to mark down.
The strains in euro-zone bond markets this year show that there are other ways for markets to drive a wedge between the strong and the weak. Concerted selling of their government bonds has forced Greece and now Ireland to seek emergency loans from other European Union countries and the IMF. Portugal may soon join them in intensive care. Spain is in the markets’ sights and the trouble is spreading to Italy, home of the world’s third-largest market for public debt.
The convergence of government-bond yields that was spurred by the euro’s launch has thus been sharply reversed. The idea that the euro itself might also be reversible and that one or more countries might revert to national currencies is no longer unthinkable. This would be costly and cause huge financial shocks for both leavers and those left behind. But the bar to exit, though high, would be surmountable.