Lacking the diplomatic tone, which European politicians are so accustomed to in recent months of negotiations with the Greek government, Mr. Hans-Werner Sinn, representing a German economic think tank, shared his own views on the future of Greece in the Euro zone.
The president of the IFO Institute shared, “The foreseeable insolvency of Greece is deeply regrettable. Greece now needs to immediately introduce a new electronic currency as legal tender and must stop all euro payment orders to other countries abroad and impose capital controls.”
Prices, Wages, Rents and Loans Should Be Re-Quoted Into Drachmas
“The new currency would devalue against the euro, which would make the country competitive again,” he explained his rationale.
Bringing the best of both worlds is in Mr. Sinn’s point of view the only viable long-term solution for Greece to regain competitiveness and for its economy to prosper once more. A debt conference which entails a haircut on Greek debt holdings of the creditors is the next step necessary for the country to regain its economic stance.
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Greece has lost over 25 percent of its Gross Domestic Product in recent years striving to achieve austerity targets and pay off the debts incurred over twenty reckless years of money borrowing by a number of Greek governments.
Mr. Sinn explained that the Bank of Greece should not be issuing new euros electronically nor issuing euro bank notes. While the bills which are in circulation in the country may remain to serve as a parallel currency, the legal tender should be the new drachma.
“Prices, wages, rents and loans should be re-quoted into drachmas,” Mr. Sinn explained.
The president of the German economic think tank shared that the recommendations outlined by him in the communique were based on the findings of the IFO institute. Under the scenario described by Mr. Sinn, Greece should be growing once more in about one to two years’ time.
In the meantime, the institution concluded that the European Union should provide the country with critical imports necessary for normal day-to-day operations, for example, medicine.