Italian Policy Maker Thinks It Might Be Better To Quit Euro Than…14 September, 2011, 2:41. Posted by Zarathustra
Tags: Debt Crisis, Economy, Europe, Financial Times, Greece, Italy, Latvia, Martin Wolf
Martin Wolf of Financial Times wrote yet another piece of the euro, in which he mentioned one Italian policy maker who told him that…
We gave up the old safety valves of inflation and devaluation in return for lower interest rates, but now we do not even have the low interest rates… It would be better to leave than endure 30 years of pain.
I did write briefly about Latvia, a country which is not currently using Euro but is planning to join. In order to keep debt and deficit within the limit, they have implemented austerity measures.
From the peripheral countries’ perspective, the Euro is now hurting them, not helping them in anyway. Austerity takes growth away, and without growth, you are hopeless in deficit reduction. That’s very obvious. Now even Greece’s tax collectors are going on strike, so even the folks who are collecting tax for the government are complaining.
Increasingly, it reminds me of the 1931 Invergordon Mutiny, when the Royal Navy’s salary was cut, some sailors went on strike. The result of that? The United Kingdom went off gold standard soon after the Mutiny.
I believe that Greece’s default is inevitable, and in the long run it might be better off for Greece to return to Drachma, the immediate consequence of that could be disastrous. Of course, as I always say, no one for sure knows the consequence, but I am bracing myself for the worst.