Advancing a Free Society

Greece and the Euro

Monday, November 7, 2011

I will discuss the following two crucial questions about Greece and the euro:

Should Greece have become part of the euro? No.

Should Greece leave the euro? Not now, but probably in the future.

Greece initially gained many apparent advantages from becoming part of the euro zone. The Greek government could borrow on the international capital market at interest rates that were only a little above the rates paid by Germany, the strongest EU economy. These low rates probably reflected a belief among investors that the strong members of the EU would support investors in the weaker economies if these economies ran into financial difficulties. Being part of the euro zone also led to easier access of Greek goods and services to the markets of other euro members, especially France and Germany. As a result, Greek GDP grew at good rates until the financial crisis hit.

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