An independent Greece would be able to devalue its currency and in that way potentially reduce its debt significantly. But it would face many of the same problems that Syriza faces now. First, there would be the same run on the banks that Greece is already suffering with individual Greek citizens removing their savings from the bank system out of fear of its eventual collapse. Greek banks would need to be secured, in the short term, by finances from some patron (ie by the state incurring further debts). And the price of the new debtors would be – as with the Eurozone this week – increasingly detailed plans for prompt debt repayment.
Second, in the short term Grexit would be inflationary (indeed that would be its very point: to convert the debts from Euros to drachmas, whose value would then be reduced by deliberate state policies of tolerating inflation – ie the cheaper the drachma, the less Greece would owe to its creditor). The more effective it was at reducing the debt, the higher inflation would be. Third, in so far as Greece still intended to have economic relationships with its neighbours they would be dictated by the terms of post-Grexit negotiations. And the same cadre of politicians in Germany and Holland, Spain and Portugal who are so evidently enjoying the dismantling of the Greek economy would be the ones to whom a post-independence Varoufakis would be sent on no doubt grim-faced and ineffective trade missions. The terms of the neighbours would be clear enough, we will trade with you only if you honour your full (ie pre-devaluation) debt. full: https://livesrunning.wordpress.com/2015/02/21/when-a-pause-may-be-the-best-that-could-be-acheived/ _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
