Greece ΄Considered΄ Leaving Single Currency

Greece has “seriously considered” leaving the euro, an adviser to the country΄s former Prime Minister has told Sky News.
Richard Parker, who advised George Papandreou, the country΄s leader until late last year, said the government investigated the prospect of exiting the single currency in some depth even in the early stages of the crisis.
Until now, the country has steadfastly denied that it ever contemplated leaving the euro.
However, Prof. Parker, who teaches economics at Harvard University but spent much of 2010 and 2011 in Athens advising on economics policy, said the government ruled out the option on economic grounds. George Papandreou was the interim prime minister of Greece in 2011.
“Frankly we discussed everything,” he said. “All options were on the table. [The question of leaving the euro] was considered seriously.”
While many economists say that the country΄s only reliable option to return to prosperity is to leave the single currency, Prof. Parker said that the benefits of such a move may be overstated. In theory, leaving the euro would enable Greece to devalue its new currency, making its exports more attractive to overseas buyers.
However, Prof. Parker said that the two dominant industries in the country – tourism and shipping – would not respond to a devaluation as much as was hoped. He also said the Greek government invited in a host of economists familiar with such episodes – including Argentinian experts who had witnessed that country΄s own devaluation – and concluded that such a move would not benefit Greece.
The revelation that the country did its own detailed internal work on the pros and cons of a euro exit comes amid growing suspicions that Greece will soon be elbowed out of the currency.
With Athens still struggling to construct a working government, and with the prospect of fresh elections next month, Brussels insiders are now openly speaking about the possibility that the country may not retain its membership.
However, the fact that the country΄s own analysis ruled out many of the benefits of such a move will undermine the assumption that it would be wholeheartedly positive, either for Greece or for other euro members.
(source: Sky News, Capital)