Marketwatch Opinion: Europe’s Secret Fear About Greece


There’s a secret fear gripping the powerful across Europe.

It has policy honchos lying awake at nights in Brussels. It has bankers in Berlin tossing feverishly on their silken sheets. It has eurocrats muttering into their claret.

The fear?

It isn’t that if Greece leaves the euro, the Greeks will then suffer a terrible economic meltdown.

The fear is that if Greece leaves the euro, the country will return to prosperity — and then other countries might follow suit.


Take a look at the chart, above.

As you can see, Greece with the bad old drachma had double the economic growth of Greece under the euro. Double. And it wasn’t alone.

Italy, Spain and Portugal tell similar stories. Their economic growth back in the 1980s and 1990s, when they were “struggling” with the lira, the peseta, and the escudo, makes a mockery of their performance under the German-dominated euro.

Apparently having control of your own national currency and your own monetary policy works well with having your own government and your own national sovereignty.

Who knew?

The data for this chart come from the International Monetary Fund’s own database. They show real economic growth in four southern European currencies in the period before they embraced the euro, from 1980 to 1998, and the period since the single currency was launched at the start of 1999. (The numbers show the average annual growth in Gross Domestic Product, measured per capita, and in real, “purchasing power” terms to strip out inflation).

The people of Europe were told the euro would bring stability. It hasn’t.

Of course many factors are involved. This isn’t just about the euro. On the other hand, the European single currency was sold to the people of these countries — when they were given a vote at all — as a magical project that would transform their economic fortunes.

They were told to give up their sovereignty and independence in return for huge economic benefits.

Instead, the euro “financialized” their economies — flooding them with tons of cheap, easy money, and creating gigantic paper Ponzi schemes that have now collapsed.

The people of Europe were told the euro would bring stability. It hasn’t.

They were told it would bring prosperity. It hasn’t.

They were told it would bring growth. It hasn’t.

Are the Greeks really just a bunch of ouzo-sipping layabouts, as the Champagne-sipping layabouts in Brussels like to claim?

Prior to embracing the euro, the Greeks managed real growth of 4% a year and an average unemployment rate of 7.7%.

Since accepting the warm financial embrace of Brussels, Frankfurt and Berlin, Greece has managed growth of 2% a year and average unemployment rate of 14%.

In other words, Greece under the euro has averaged half the growth, and double the unemployment, of Greece under the drachma. Some benefit.

Iceland went through a massive financial crisis in 2007-9, just like Greece. But Iceland is a sovereign country with its own currency. The Icelandic krona fell about twice as far on currency markets as the euro. A cheap krona helped Iceland get back on its feet.

That’s what you can do when you have your own currency.

It’s not really a surprise that anti-establishment movements have been rising in Italy, Spain and Portugal, as well as in Greece.

Countries that joined the euro have lost sovereignty as well as growth. Why should the prime minister of Greece have to ask the permission of the chancellor of Germany before changing his national pensions policy? Why should he have to accept hectoring from international financiers who are telling him that Greece has too many post-graduate students?

Today the Greeks are being warned of doom, decay and disaster if they try to get by with their own currency once again.

Never mind that doom, decay and disaster is what they’ve had for at least the last eight years.

They should also know that Brussels has warned all this before.

Back in the 1990s the British were told they’d be in deep trouble if they didn’t give up the pound sterling for the common currency.

The British economy would tank, they were told. Britain would become “isolated.” Oh, and you could forget about London remaining a big financial center. Without the euro, London would be finished.

So much for that. If you want to see how finished London really is, try buying a house there.


Brett Arends is an award-winning financial columnist with many years experience writing about markets, economics and personal finance. He has received an individual award from the Society of American Business Editors and Writers for his financial writing, and was part of the Boston Herald team that won two others. He has worked as an analyst at McKinsey & Co., and is a Chartered Financial Consultant. His latest book, “Storm Proof Your Money”, was published by John Wiley & Co. His editorial first appeared on Marketwatch.



  1. Michael hatzidakis on

    I was leaning towards sticking with the euro because I thought it would continue to strengthen Greece’s economy, however after seen that chart of realistic figures along with the other nations it really made me realise that Greece’s economy has plundered under the euro,numbers don’t lie, neither do statistic along with solid facts, however if Greece do return to the dracma I can’t help but feel initially they will have to face some sort of minor economic meltdown in the beginning, but I have no doubt this will be overcome by the passion and fighting spirit of the Greek people and it’s country, Greece number one farken…

  2. Sally Tournas on

    This is a good time to let cool heads prevail. The people of Greece are lucky to have Tsipras leading them during these difficult times. Enough is enough and increased austerity with no opportunity to rebuild the economy is not the answer. This is not an acceptable agreement. Tsipras decided the people of Greece and “true” democracy should choose their fate. Let’s see what the E.U. plans to do to about this and also encouraging Greece to remain within the E.U. Personally, I believe it is in the best interest of not only Greece, but the E.U. and possibly the world for Greece to remain in the E.U. at this time. The E.U. can be beneficial to all nations provided some modifications are made in the best interest of all its members. It is in its childhood and likely experiencing growing pains but can turn out to be a very responsible adult.

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