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Alarmingly the UK Conservative analysis of the unmsustainability of the Euro seems to be coming true.

Presumably the answer for |Greece is to repudiate the debt in total, withdraw from the Euro and accept that the New Drachma is going to start its existence at a low value.

The richer Greeks would then see the value of assets they have kept at home severely depreciate. Foreign creditors would lose their investments. However some new growth could at least try to emerge from the scorched earth of the old economic order.

The above seems to me to be a best case solution for Greece, in the absence of agreement for massive gifts in transfer payments from the richer parts of Europe. Perhaps an intra-European equivalent of the Marshall plan after the Second World War might work, but I doubt either the vision or the altruism (enlightened self interest) to tey such an approach is lacking. Certainly the British public would be strongly opposed.

by Gary J on Mon Feb 13th, 2012 at 10:26:25 AM EST
The question then would be whether this same approach is appropriate for Portugal, Italy, etc...
by asdf on Mon Feb 13th, 2012 at 11:50:45 AM EST
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They all would be better off if they exited in union to a new union. If only.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Feb 13th, 2012 at 12:59:20 PM EST
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Ironically the Conservative analysis is only correct because of conservative policies.

Masstricht was an idiocy, but in some different reality where Maastricht never happened there would have been nothing inevitable about the current meltdown.

It could easily have been avoided with progressive policies.

The only costs would have been loud but ignorable squealing from 'investors' complaining about being robbed, and about solutions that were inherently unserious and damaging, likely to cause job losses, etc.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Feb 13th, 2012 at 11:52:20 AM EST
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Ironically the Conservative analysis is only correct because of conservative policies.

As we have noted before, neoliberal fantasy-world economic notions such as the loanable funds fallacy, or the 'facts' that governments both fund themselves in the open market and crowd out private investment are actually institutionally true in the EU, which has legislated itself into a neoliberal fantasy world.

The fact that neoliberal fantasy world economics is untenable and ends up crashing and burning will crash and burn the EU, but in the meantime all political and economic agents in the EU are constrained to operate within neoliberal fantasy world economics.

And you know what's best? Narratively speaking, when it all dies it will be Keynes' fault.

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker

by Migeru (migeru at eurotrib dot com) on Mon Feb 13th, 2012 at 07:00:09 PM EST
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