Greek banks have reopened this week, but Greece’s economy remains trapped in a tragic financial standoff—ironically, an economic war orchestrated by the monetary system originally designed to promote peaceful cooperation. So as the protests, financial panic, and political brinksmanship run their course, can anyone envision Greece actually rebuilding from this mess? Whether it leaves or stays under the yoke of the German-led technocracy, Athens will need to find an alternative path to recovery.
With Syriza’s current government in turmoil, there’s no clear Plan B. But one report by the progressive think tank Just Jobs Network (JJN), based in Washington and New Delhi, laid out some practical hypotheticals on what might happen in the event of stage-left Grexit or continued eurozone membership.
First, JJN researcher Abhijnan Rej acknowledges that the Greek crisis reflects problems extending far beyond Athens, revealing “the urgent need for a de-coupling between the real sector [i.e., concrete consumed goods and services]—responsible for growth-enhancing investments in employment, infrastructure and social protection, among other things—and the financial sector, which is fueled by large-scale speculation.” For Greece to treat the immediate symptoms of this long-term continental malady, Rej walks through several options:
Grexit is the most controversial but arguably more realistic path, according to this analysis. And from a left standpoint, the shock of default would be preferable to indefinite debt enslavement, simply as a means of reasserting economic sovereignty and autonomy.
In practical terms, Grexit would require Athens to issue short-term substitute currency in the form of IOUs—scrip or vouchers backed by the Bank of Greece. The country would shift toward reintroducing a national currency with “an exchange rate policy that leverages its low value relative to the euro” (initially a fixed rate, then floated). Amidst a looming trade international imbalance (with heavy dependence on imports), reviving Greece’s old currency—at a rate of about 341 drachma to one euro—could make exports extremely cheap, but also introduce volatility and possible hyperinflation.
Post-euro life would introduce painful isolation, at least in the short term, but sticking with the financial devil they know would likely be even more miserable. According to JJN, Greece could go the “Cyprus” route, staying nominally eurofied under draconian capital controls (like those Greece already imposed in late June), possibly coupled with haircuts on private deposits to shore up failing banks. This could not ensure any long-term recovery, though, particularly not if the troika continues its current program of regressive tax hikes, privatizations, and budget slashing—an agenda that finance officials have sadistically intensified since the No referendum, with reluctant agreement from Syriza’s leaders.