Newspaper article The Topeka Capital-Journal

David Ignatius: Allow Greece a Gentle Exit

Newspaper article The Topeka Capital-Journal

David Ignatius: Allow Greece a Gentle Exit

Article excerpt

The Greek financial crisis has eased for now. But many skeptics share the worry of German Finance Minister Wolfgang Schauble that the bailout may not work, and that the only way to restore competitiveness and growth is a Greek exit from the euro.

Schauble was blasted as a heartless German for insisting "the better solution for Greece" could be a "Grexit," as it's known. He had earlier proposed a five-year "timeout" for Greece from the common currency. For these heretical views, he was portrayed by a cartoonist as a black-clad terrorist with a knife at Greece's throat.

But maybe Schauble has a point: What's the greater cruelty? Prolonging Greece's agony with a plan that maintains its eurozone membership but cripples it with unpayable debts and perpetual insolvency? Or taking the painful but relatively quick cure of restoring the drachma and letting it fall to a level where Greece can again be competitive and prosperous?

The bailout calls for reform measures that would be difficult, even if the government and public supported them. But Greece's government and its people abhor the imposed terms of the bailout.

The bailout plan may rescue Europe -- by restoring German-French amity and signaling that the currency union is intact. But it won't rescue Greece. It will leave its uncompetitive economy in the financial version of an intensive care unit, surviving on new loans and fiscal transfusions.

The kinder approach might be to let Greece leave the eurozone, in what might be called an assisted transition. A devaluation of the drachma to, say, 50 percent of the euro's value would make Greece instantly competitive and a magnet for investment. But the devaluation shouldn't go too far. The European Central Bank could pledge to intervene in currency markets to support the drachma and prevent it from falling by, say, 70 percent or more. …

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