Friday, January 30, 2015

Mario Seccareccia on Greece and the European Crisis

Nice interview by Mario for INET. The main point in his words:
"In the medium term, Greece could create some form of parallel currency set at par with the euro, like Argentina did in the early 2000s. The government in Argentina used 'patacones' to buy things and pay employees and they became quite acceptable because ultimately regular people could pay taxes with this currency. The Greeks could have a parallel national currency without altogether abandoning the euro. 
So these various short-to-medium-term measures may well be available to prevent default, but, at the end, if the Greek government cannot renegotiate its crushing debt burden — without some form of debt forgiveness in however form it will be disguised — you could see a Greek default happen. If it reaches that point, I don’t think there’s anything in the Eurozone treaties that would prevent Greece from retaining the euro. In this case, it will have to learn from the experiences of dollarized countries such as Ecuador that have been surviving under very severe constraints on fiscal policy but without the oil revenues that until recent times have served well to replenish Ecuador’s coffers."[Italics added]
Not sure if Mario is against Greexit, meaning exit from the euro, but the suggestions is that even with default there is no need for exit. I am not against his perspective, and that was the view that Wynne Godley had about Europe and the euro, for the former, but against the way the latter was implemented without fiscal federalism, and significant transfers. I also noted before that devaluation or exit does not solve all the problems.

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