Is Grexit the Answer?

In my humble opinion Greece should bite the bullet and exit the Euro. Their pain would be harsh and immediate. But so will staying in the Euro. And staying in the Euro will not ultimately fix their problem. Greece’s financial situation is not fixable. They must simply wipe the slate clean and start over. That will mean a substantial amount of pain for a substantial period of time. Perhaps more pain immediately than trying to stay in the Euro. But the time of the extreme pain can potentially be reduced substantially if Greece take matters into their own hands.

Greece is bankrupt, and they have no realistic chance of recovering financially within the Euro. Staying in the Euro will be a sentence of death by financial starvation. It will be slow and it will be painful and it potentially may last a very long time. But the final result will be financial death. And that will likely mean leaving the Euro at that time.

Leaving the Euro immediately will be financial death as well. But it will be quick. And it will clear the way for a possible recovery at some point in the future.

There will be great financial inflicted on the Greek people in the coming years – whichever path they take. I cannot speak for the Greek people, but I can truthfully say that I would opt for a lot of pain now – with the prospect of eliminating much of it in the foreseeable future, rather than the alternative, which seems to me to be a lot of pain with no clear end in sight.

Greeks must face up to the fact that they are in a position with almost no bargaining chips left. They are going to have to pay the piper. Leaving the Euro now may seem harsh, but so is the alternative – and that alternative does not preclude having to leave the Euro later anyway.

It seems to me that Greeks would be better off in the long run, if they simply bit the bullet now, and left the Euro.

The Euro zone cannot afford to do what Greece must have done to make their staying in the Euro viable in the long run. The Euro zone has several other problems to deal with and they are much larger and more difficult than Greece.

A Grexit would be a minor leak that can easily be repaired for the good ship Euro; whereas a Frexit, Spexit, or Itexit would most likely sink it.

For the record, and obviously, I do not own any Greek debt instruments.

 

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