Greece, Ireland and the Euro
15 January, 2010
There was an interesting comment piece in the Financial Times a few days ago called “Why Greece will have to leave the Eurozone”. The writer was Desmond Lachman who is a Resident Fellow at the American Enterprise Institute. The AEI is conservative think-tank, whose Board of Trustees is graced by the presence of Dick Cheney, amongst others.
As a commentator, Mr Lachman doesn’t appear to be a loose cannon or a right-wing nutcase. He is a former managing director and economic strategist at Salomon Smith Barney and also served as deputy director in the IMF’s Policy Development and Review Department. And the FT is hardly a fringe publication.
The thrust of Mr Lachman’s article is set out in the first paragraph, where he states that “I have also observed at close quarters the rather well-defined and predictable stages through which countries go as their currency regimes unravel. This experience informs me that, much like Argentina a decade ago, Greece is approaching the final stages of its currency arrangement. There is every prospect that within two to three years, after much official money is thrown its way, Greece’s euro membership will end with a bang”.
The interesting thing is that, if references in the article to Greece were to be replaced by references to Ireland, the argument being made would appear just as reasonable (or unreasonable) as in the original version (save for reference to Greece managing to qualify for Euro membership in 2001 by engaging in creative budget accounting).
I wonder has anybody worked out a contingency plan for how an exit from the Eurozone would be managed by a member? I suspect there would be a boatload of practical problems. David McWilliams seems to be strongly in favour of Ireland’s withdrawal, so maybe he has worked it out!
Incidentally, is it just me or does it look odd to write the currency as “euro” (with lower case E) rather than “Euro”? I note that the Economist Style Guide mandates lower case, although it suggests upper case for “Eurobond”, which seems illogical.