Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
I see above however that some have said that moving to a new currency will improve the Greek import-export dynamic. Every country is different however, and Greece doesn't have much in the way of manufacturing. A new currency might improve the level of its valuations in the future, but two of Greece's biggest industries are tourism and shipping. In both, you have external euros coming into the country. one might argue that two of Greece's economic brightpoints are actually forms of export (inasmuch as Greek tourist goods are sold to tourists from other countries) and also a service industry (shipping) that deals almost exclusively with foreign clients. Presumably, there may be a way to keep the level of Greek tourist prices what they are, but I don't see how you can do it without artificial controls. Also note that though the Greek tourism industry can surely improve and become more efficient, the switch to the Euro (and the rise in tourism prices which is undeniable) did not decrease the numbers of tourists to Greece. In the last decade, tourism increased year over year until the crisis.

Finally, about reducing Greek debt to the level that it was prior to the crisis, it's important to remember that creditors fled Greece when it's level of debt to GDP was at 110%. It had been at 95-105% for at least a decade if not more.  So, presumably, a reduction to that level would not improve things as far as credit goes because those levels are the levels which spooked the credit markets in the first place (after several hedge funds made huge short bets against the country).

Finally, it may be that Greek banks are repatriating Greek debt by having the ECB back them in their purchases of Greek bonds, thereby paying off outside creditors while the EU and Greek banks take on more EU debt. In other words, the longer these austerity measures continue, then we come to the point when the totality of the debt has moved from private hands to EU taxpayers and Greek banks.

by Upstate NY on Fri Feb 18th, 2011 at 11:29:58 AM EST
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