Notice who is NOT saying Greece is staying?
The Greeks.[/quote]
I recall that Krugman wrote a big article on the euro zone about half a year ago and he predicted one of two likely outcomes: either an increase in the degree of fiscal integration within the euro zone (up to the creation of “E-bonds” which are guaranteed by the EU as a whole, as opposed to individual countries), or departure of Greece from the euro zone, possibly followed by Spain and Italy.
The economic situation in Greece is extremely grim, the unemployment rate has been going up month after month (it just hit 15%) and there’s no reason to think that the current strategy is working. Something radical has to be done.
Krugman always offers Argentina as a parallel. Greece has a peg to the euro (or, essentially, to the currency of Germany and France, because these two combined account for more than a third of EU GDP, when Greece is only about 2%). Pre-2002 Argentina used to have a peg to the US dollar. Argentina went into a recession in 1999. Greece went into a recession in 2008. Argentina tried its best to balance the books and to keep the peg afloat, but it only succeeded to prolong the pain till 2002, or for three years, and to bring unemployment to 25%. When it finally went off the dollar peg, this is what happened:
[quote]I bet Britain is glad it stuck with sterling now.[/quote]
