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London Mayor: The Greeks Must Leave the Euro Behind

Euro bills
AP
Euro bills

There's no realistic hope that Greece can remain part of the European unified currency, LondonMayor Boris Johnson said on Monday.

Writing in his regular column for The Daily Telegraph newspaper, Johnson said plans for a rescue of Greece depend on unrealistic hopes that "Greeks would only change their national character, and suddenly discover a Scandinavian faith in government combined with German habits of industry and thrift." That's not going to happen so Greece should forge ahead with "new economic identity with a new drachma."

Johnson has a reputation as a conservative but his analysis doesn't really differ that much from that of Paul Krugman, the New York Times liberal economist columnist.

"The trouble is that the Greek austerity measures are making the economy worse. Unemployment is now officially at 16 percent, though the rate among under twenty-fives is approaching 40 percent.

"Productivity is crashing under the weight of strikes and unrest, and debt is now more than 160 percent of GDP, compared to 60 percent debt to GDP in the UK," Johnson writes.

He goes on:

I don’t believe that Greece would be any worse off with a new currency. Look at what happened to us after we left the ERM, or to the Latin American economies who abandoned the dollar peg. In both cases, it was the route to cutting interest rates and export-led recovery.

The euro has exacerbated the financial crisis by encouraging some countries to behave as recklessly as the banks themselves. We are supposedly engaging in this bailout system to protect the banks, including our own. But as long as there is the fear of default, as long as the uncertainty continues, confidence will not return across the whole of Europe—and that is bad for the UK and everyone else.

If this is the opinion of a conservative British politicians, imagine what Greeks must think. They are being offered an economically destructive "austerity program" in exchange for payments to the creditors of their government. Many of those creditors are foreign banks and governments. If you were Greek, would this seem like a good deal?

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