'It's in Greece's Interest to Reintroduce the Drachma'

[marmar]

Interview with Economist Hans-Werner Sinn, from Der Spiegel:



SPIEGEL: Mr. Sinn, the Greeks have decided not to hold their referendum. They want to keep the euro and allow themselves to be rescued by Europe. Can we all breathe a sigh of relief?

Sinn: What politicians refer to as a "rescue" will not actually save Greece. The Greeks won't ever return to health under the euro. The country just isn't competitive. Wages and prices are far too high, and the bailout plan will only freeze this situation in place. So it's in Greece's interest to leave the euro and reintroduce the drachma.

SPIEGEL: How would that work?

Sinn: It must happen quickly. Greek banks will have to close for one week. All accounts, all balances and all government debt would have to be converted into drachmas. Then the drachma would depreciate. .............(more)

The complete piece is at: http://www.spiegel.de/international/europe/0,1518,796251,00.html

[xchrom]

1. Recommend

[marmar]

2. I just went over to E&OA and saw your post.....

Je suis desolee for posting it again.....but I gave your's a K&R.

[xchrom]

6. It's all good. Nt

[badtoworse]

3. So any Greeks that have bank accounts denominated in euros will lose them...

and get (worthless) drachmas instead. Would you leave money in the bank under those conditions? I sure wouldn't. You would have a huge run on the banks and riots when the banks couldn't come up with the funds.

[ParkieDem]

4. Not an expert,

but I think that's why you have the bank close for a week. It would be akin to FDR's bank holiday.

Plus, you would have to introduce some restrictions on capital flight from Greece. They key is announcing these restrictions, and the banks' closure, in a timely fashion.

[StarsInHerHair]

5. Iceland proved their way is the correct way