In an article published in Foreign Policy, British economist Philippe Legrain has urged Greece to “not give in to Germany’s bullying”, stressing that the current policies in place will lead Europe to catastrophe. Although Greece is not in the position to affect major change across Europe, the Greek case could nevertheless act as a catalyst in the escalating political reaction against the political stagnation in the Eurozone.
The recent four-point plan proposed by Greek Finance Minister Varoufakis “is eminently sensible” and “perfectly reasonable”, but “in the parallel universe inhabited by Germany’s Finance Minister Wolfgang Schäuble, such demands are seen as ‘irresponsible’: Greece must be bled dry to service its foreign creditors in the name of European solidarity”.
Mr. Legrain also disputes the belief that Greece would have little leverage in talks with Eurozone officials, should the country run out of cash and the ECB suspends liquidity towards the banks. In such a case Greece “would doubtless default on all its debts to both Eurozone governments and the ECB, as well as the Bank of Greece’s Target 2 liabilities. Speculation would soon start about which country might be next to exit the euro — Portugal? — and the single currency would suddenly look eminently revocable”.
Finally, the economist proposes the introduction of tradable IOUs, effectively acting as a parallel currency, in order to cover domestic obligations, such as pension payment and recapitalizing ailing banks. This would “enable the Greek government to default on its EU creditors relatively painlessly, while remaining within the euro”.
