Some quotes from a panel discussion on the euro crisis at the American Economic Association’s annual meeting:
A decision by a new Greek government to leave the eurozone or a forced exit of Greece would be even worse than the collapse of Lehman Brothers in 2008, said Barry Eichengreen, an economic historian at the University of California at Berkeley:
- "In the short run, it would be Lehman Brothers squared."
- "While holding the eurozone together will be costly and difficult and painful for the politicians, breaking it up will be even more costly and more difficult."
Kenneth Rogoff, a former chief economist at the International Monetary Fund and a Harvard professor, said the euro is a historic disaster:
- "It doesn’t mean it is easy to break up."
A decision by a new Greek government to leave the eurozone or a forced exit of Greece would be even worse than the collapse of Lehman Brothers in 2008, said Barry Eichengreen, an economic historian at the University of California at Berkeley:- "In the short run, it would be Lehman Brothers squared."
- "While holding the eurozone together will be costly and difficult and painful for the politicians, breaking it up will be even more costly and more difficult."
Kenneth Rogoff, a former chief economist at the International Monetary Fund and a Harvard professor, said the euro is a historic disaster:
- "It doesn’t mean it is easy to break up."
Martin Feldstein, a longtime critic of the euro project, said all the attempts to return Europe to healthy growth have failed:
- "I think there may be no way to end to euro crisis."
- "The launch of a full scale quantitative easing by the European Central Bank are in my judgment not likely to be any more successful."
- "The best way to ensure the euro’s survival would be for each individual eurozone member state to enact its own tax policies to spur demand, including cutting the value-added tax for the next five years to increase consumer spending."
3 reasons why ‘Grexit’ = Lehman Brothers squared
1: A precedent would be set: countries can leave the euro. Bond yields in periphery countries will shoot up on the renewed fears of a breakup.
2: Grexit would make sense for Greece only if accompanied by default. That would be expensive and embarrassing for eurozone countries since two bailouts would have failed.
3: Grexit would happen against the wishes of the majority of Greeks. Investors would wonder if Germany would also be so sanguine about other accidental departures. Not only is the ECB’s bond-buying power unproven, but it is unlikely that the bailout funds are big enough to resolve serious problems in a country like Italy.
- "I think there may be no way to end to euro crisis."
- "The launch of a full scale quantitative easing by the European Central Bank are in my judgment not likely to be any more successful."
- "The best way to ensure the euro’s survival would be for each individual eurozone member state to enact its own tax policies to spur demand, including cutting the value-added tax for the next five years to increase consumer spending."
3 reasons why ‘Grexit’ = Lehman Brothers squared
1: A precedent would be set: countries can leave the euro. Bond yields in periphery countries will shoot up on the renewed fears of a breakup.
2: Grexit would make sense for Greece only if accompanied by default. That would be expensive and embarrassing for eurozone countries since two bailouts would have failed.
3: Grexit would happen against the wishes of the majority of Greeks. Investors would wonder if Germany would also be so sanguine about other accidental departures. Not only is the ECB’s bond-buying power unproven, but it is unlikely that the bailout funds are big enough to resolve serious problems in a country like Italy.
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