Published: June 16, 2015 2:44 p.m. ET
There’s a secret fear gripping the powerful across Europe.
It has policy honchos lying awake at nights in Brussels. It
has bankers in Berlin tossing feverishly on their silken sheets. It has
eurocrats muttering into their claret.
The fear?
It isn’t that if Greece leaves the euro EURUSD, -0.3633%
, the Greeks will then suffer a terrible economic meltdown.
The fear is that
if Greece leaves the euro, the country will return to prosperity — and then
other countries might follow suit.
Take a look at the chart, above.
As you can see, Greece with the bad old drachma had double
the economic growth of Greece under the euro. Double. And it wasn’t alone.
Italy, Spain and Portugal tell similar stories. Their
economic growth back in the 1980s and 1990s, when they were “struggling” with
the lira, the peseta, and the escudo, makes a mockery of their performance
under the German-dominated euro.
Apparently having control of your own national currency and
your own monetary policy works well with having your own government and your
own national sovereignty.
Who knew?
Jack Hough previews the new issue of Barron's, which looks
at the mid-year roundtable and the most intriguing investments for the rest of
2015. Photo: Getty
The data for this chart come from the International Monetary
Fund’s own database. They show real economic growth in four southern European
currencies in the period before they embraced the euro, from 1980 to 1998, and
the period since the single currency was launched at the start of 1999. (The
numbers show the average annual growth in Gross Domestic Product, measured per
capita, and in real, “purchasing power” terms to strip out inflation).
Of course many factors are involved. This isn’t just about
the euro. On the other hand, the European single currency was sold to the
people of these countries — when they were given a vote at all — as a magical
project that would transform their economic fortunes.
They were told to give up their sovereignty and independence
in return for huge economic benefits.
Instead, the euro “financialized” their economies — flooding
them with tons of cheap, easy money, and creating gigantic paper Ponzi schemes
that have now collapsed.
The people of Europe were told the euro would bring
stability. It hasn’t.
They were told it would bring prosperity. It hasn’t.
They were told it would bring growth. It hasn’t.
Are the Greeks really just a bunch of ouzo-sipping
layabouts, as the Champagne-sipping layabouts in Brussels like to claim?
Prior to embracing the euro, the Greeks managed real growth
of 4% a year and an average unemployment rate of 7.7%.
Since accepting the warm financial embrace of Brussels,
Frankfurt and Berlin, Greece has managed growth of 2% a year and average
unemployment rate of 14%.
In other words,
Greece under the euro has averaged half the growth, and double the
unemployment, of Greece under the drachma. Some benefit.
Iceland went through a massive financial crisis in 2007-9,
just like Greece. But Iceland is a sovereign country with its own currency. The
Icelandic krona fell about twice as far on currency markets as the euro. A
cheap krona helped Iceland get back on its feet.
That’s what you can do when you have your own currency.
It’s not really a surprise that anti-establishment movements
have been rising in Italy, Spain and Portugal, as well as in Greece.
Countries that joined the euro have lost sovereignty as well
as growth. Why should the prime minister of Greece have to ask the permission
of the chancellor of Germany before changing his national pensions policy? Why
should he have to accept hectoring from international financiers who are
telling him that Greece has too many post-graduate students?
Today the Greeks are being warned of doom, decay and
disaster if they try to get by with their own currency once again.
Never mind that doom, decay and disaster is what they’ve had
for at least the last eight years.
They should also know that Brussels has warned all this
before.
Back in the 1990s the British were told they’d be in deep
trouble if they didn’t give up the pound sterling for the common currency.
The British economy would tank, they were told. Britain
would become “isolated.” Oh, and you could forget about London remaining a big
financial center. Without the euro, London would be finished.
So much for that. If you want to see how finished London
really is, try buying a house there.
Brett Arends
Brett Arends is an award-winning financial columnist with
many years experience writing about markets, economics and personal finance. He
has received an individual award from the Society of American Business Editors
and Writers for his financial writing, and was part of the Boston Herald team
that won two others. He has worked as an analyst at McKinsey & Co., and is
a Chartered Financial Consultant. His latest book, "Storm Proof Your
Money", was published by John Wiley & Co.
Source: http://www.marketwatch.com