How will the “Greek tragedy” end?

ww. This question is now raised by politicians and political observers all over the world. – Will the proud, freedom-loving nation abandon the euro and go its own way with its own currency, the drachma? The drachma is one of the oldest currencies in the world. As early as 2500 years ago it was used as a means of payment in Athens. Big banks in European countries rightly are afraid of losses. Commentators and journalists who are close to these banks, draw a sinister picture of the risks of such a currency conversion and advise against it. They say the drachma would be weak. Unemployment would continue to soar, and imports would be costly. The debt would get too high for the Greeks and riots would break out. Other countries would be caught up in the whirl of events, so that the consequences for the euro system and for “Europe” would become incalculable. – Is this pitch-black picture realistic?

In Iceland, the trend is quite different. Two system-relevant, globally active banks have gone bankrupt there. Another bank was nationalized and the state was almost bankrupt. The bankruptcy of the banks was settled without the counters being closed, the payments being stopped and the automated teller machines being shut down. The savings of the citizens were protected. Current Concerns reported. The voters decided in two referendums that speculative funds from abroad (which benefited from high interest) would not be paid back with tax money. The country devalued its currency, introduced capital controls and, after a relatively short time, it is now on the road to recovery by its own efforts and can pay back the aid credits. Iceland is an example of what is possible with one’s own efforts. Moody’s and Standard & Poor’s already Iceland upgraded.

And Greece? Undoubtedly, the new currency would be weak and imports would become more expensive. Greece currently imports twice as much as it exports. This is not carved in stone. Why should Greece not produce refrigerators, household appliances and other durable goods on its own instead of importing them from Germany? Well-trained workers who are currently unemployed are ready to work. Greece, a country of sheep, even imports lamb meat from New Zealand. This is absurd. An own currency would also have positive effects on export and tourism: Today’s expensive hotels in this country blessed by nature would become cheap for the tourists; they would soon be booked out again and would have to hire new employees. Unemployment rates would decrease, because everybody would join in to set their house in order and to correct false developments. – This perspective is feasible if the will is present. The other EU countries could lend a hand.

In addition, the euro would not disappear, but still be used as currency – as is the case for example in Switzerland with the Swiss franc. The euros on savings accounts (which are now guaranteed by the state) would remain there and could still be used. A mandatory exchange of private savings would not be necessary. Wages and pensions would in future be paid in drachmas and the prices would be shown in drachmas as well. Rents, debts and other obligations would – according to the income – be converted into the local currency. The Greek National Bank will certainly provide enough drachmas for the conversion. A currency conversion of this type would be far from being as drastic as the currency reform in Germany after World War II. It could serve as a model and ease the tense debate on the euro.

The Greeks will not accept it in the long run to live indefinitely under the tutelage of the so-called troika (EU, ECB and IMF). No sophisticated savings and aid programs will change anything (which is now to be renegotiated). – And what happens to the debts of Greece? The country cannot pay them back one way or another – whether it keeps the euro or not. The banks and institutions that have provided the funds share a responsibility and therefore have to bear their share of this debt burden.

Another aspect is the debts in the ECB’s “TARGET2” settlement system of about 100 billion. These obligations have incurred, because Greece has imported more than exported for many years. A withdrawal from the euro-zone would not make these obligations grow. Professor Hans-Werner Sinn (Ifo Institute, Munich) considers the TARGET2 system – in addition to the debt problem – to be a “ticking time bomb”. High and ever-growing obligations of mostly importing countries, especially in the south, are confronted with high credits of exporting countries in the north, Germany in particular.

At the moment we urgently need a clear message to the citizens of the EU that in case of a withdrawal of a member state from the euro-zone there would be no mandatory exchange of savings. This is the only way to prevent panic and stop a run on banks and a capital flight, both of which are already underway.

It is to be hoped that the “Greek tragedy” does not end in a drama, but will leads to a new start.