Why Greece should default and exit the euro

ΠΗΓΗ: The Telegraph

By Louise Armitstead

Washington’s Center for Economic and Policy Research (CEPR) has just published a note comprehensively kicking the Greek rescue plan - and the international leaders driving it. The note is called “More Pain, No Gain for Greece: Is the Euro Worth the Costs of Pro-Cyclical Fiscal Policy and Internal Devaluation?” but the authors’ answer is clear: Greece would be far better off defaulting and quitting the euro
.

Unlike the troika’s messy efforts, the CEPR’s arguments are clear and compelling.

Greece has already suffered among the worst losses of output from financial crises in the 20th and 21st centuries, says the CEPR. Even if the economy starts to recover, Greece will have lost 15.8pc of GDP since its peak.

Greece is paying crippling interest rates of 6.8pc of GDP - one of the highest rates in the world. In the eurozone, only two are above 4pc - Italy and Portugal. It seems unlikely that the bailout will bring the interest payments down.

It’s getting worse. The CEPR says: “The economy continues shrinking and this makes it even more difficult to make revenue targets. The IMF has consistently underestimated the loss of GDP for Greece, lowering its projections by a huge 6.9pc since its First Review of the Stand-By Arrangement in September 2010.”