Authors: Theodore Katsanevas
In our paper we argue that, the economic stagnation of only the euro zone countries in a world that is growing much faster, is mainly due to the overvalued euro and the related austerity policy measures imposed under Berlin guidelines, The malpractices of the international markets, the underground currency wars between the dollar, the euro and the yen, are also to blame. The imposition of the euro zone as an optical currency area in totally different economies and without a fair political umbrella has been wrong. For Greece, it has been catastrophic. Between 2010- 2014, the country’s average annual GDP, declined at a yearly level of 4,6% and there are no signs that this will soon be reversed. The strict austerity policies imposed by the new “Memorandum”, will lead to more recession. In front of the deadlock, a structured Grexit is the proper alternative solution. This implies a controlled bankruptcy, suspension of debt payments and negotiations for cutting and extending its repayment period.
During the initial negotiation days, the government must provide liquidity to the economy through the issuing of non-interest state bonds at a ratio of 1 : 1 in relation to the euro. Existing capital controls and transactions with electronic money will be helpful for the same cause. The next step is the issuing of the new drachma devaluated at 25-30%. In order to avoid hyperinflation, the amount of the new drachma produced, must not exceed a certain level of the M2. The euro may continue to be used as a parallel currency for a period decided in accordance with the result of negotiations and economic trends. Low and medium incomes could be increased gradually, in relation with labour productivity and GDP growth trends. Government spending restrictions, the combat of corruption, impunity, bureaucracy, tax evasion and the strengthening of productive investments, are also necessary for a healthy new beginning.
Key Words: Greek Tragedy, stagnation, overvalued euro, austerity policies, currency wars
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