This note on Greece using the drachma and euro was written in response to an FT comment piece by Gideon Rachman arguing the Euro was a “failed economic experiment”

According to World Bank figures Greek GDP per capita in US$ ppp terms rose from $9320 in 1981 to $18,077 in 1999 when Greece joined the Euro. It thus took 20 years using the drachma for Greece to double its GDP despite major drachma devaluations in the 1980s. Between 1999 and 2009 using the Euro, Greek GDP per capita rose from $18,077 to $29,467 a  much faster rate of growth than using the drachma. So Gideon Rachman’s assertion that  ‘EU is destroying wealth and stability by locking the nation into a failed economic experiment’ would have made no sense five years ago.

It is true the US initiated banking crisis brought that growth to a dead stop and Greece’s GDP per capita in 2014 was $25,752, a $4000 drop from 2009. It is equally true that unimaginative orthodox leadership in Brussels and at the IMF and a succession of governments in Greece unwilling to challenge their clientalist base – and Syriza is no exception – has brought Greece to the present crisis.

But there is no evidence that had Greece reverted to the drachma at any stage in the last five years it would have found the philosopher’s stone of growth, exports, tax revenues, good public administration, sensible pensions, opening up oligopolies to competition and non-populist politics.

The democratic will of the Greek people as expressed in all opinion polls and in repeated elections is that they wish to keep the Euro. Syriza did not propose leaving the Euro in January and the Greek people may well vote Yes to Europe and reject the populism of Syriza, Golden Dawn and others who want a No vote. If we respect democracy we should respect the will of the Greeks to stay part of the Eurozone.

Reading the FT and other British papers in Greece, the Schadenfreude of the London commentariat who have been dooming the Euro to failure for years is depressing. Here in Greece I will urge all Greek friend to vote Yes on Sunday in the hope that a compromise can be reached. But anyone who thinks the drachma (or lire, peseta, or punt)  will help EU find a way out of its present stasis is dreaming.growth than using the drachma. So Gideon Rachman’s assertion that  ‘EU is destroying wealth and stability by locking the nation into a failed economic experiment’ would have made no sense five years ago.

 

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