Is Greece the word? Or should Germany leave the euro?

13th June 2012

So Greece is not the word everywhere. Stricken though it is, its departure may not help. The eurozone has been on a downward spiral for years, and for many, removing Greece won't change its path.

Yet most discussion about a potential breakup of the euro zone assumes that Greece and other financially troubled countries would be the ones who ended up abandoning the common euro currency.

But there's a compelling alternative to this belief, with, on research, many who are willing to back it up. They say, such as on Time Business, that the true problems of the euro zone could be best addressed if Germany were the one to leave, accompanied, perhaps, by a few other rich countries.

However, the most recent argument comes from Bloomberg, this could stave off disaster. A Greek exit from the currency union would make the situation even worse, it says.

It says a Germany exit might be the best available options given the difficulties surrounding the weaker Eurozone members. "A single, powerful nation would have the best shot at executing a relatively swift exit that would be over before anyone could panic. No agonizing over who exits and who doesn't. Stripped of its German export powerhouse, the euro would depreciate sharply, but would not become a virtually worthless currency, as, for example, any re-issued Greek drachma surely would."

And with the euro devalued, a Greek exit and devaluation would be relatively pointless. "So, no contagion or bank runs." And the currency depreciation would improve the remaining nations' competitiveness and boost their balance sheets.

The argument provoked numerous heated responses.

Ajax124 comments on the piece: "The political consequences of a German exit would be enormous as well as causing devastating economic damage. Fragile democracies could follow the path of the 1930's into right wing upheaval and fascism. Germany is the glue that is holding the eurozone together – without it it would be chaos in Europe and the prospect of a worldwide meltdown. No time for folly!"

Meanwhile, Chester Cordero says: "What? Germany is the only good country left in the euro zone, If you take it out you are left with nothing more than a group of rotten tomatoes you call the olive belt. A Europe without Germany is no more fiscally sound or politically relevant than the Arab league. 

"What needs to happen is that the south needs to learn the ways of the north, however hard or long it may be. Perhaps Europe should be divided in two, the German block in the North and the Greek block in the south. That way the south would not be so pressured to perform as well as the North yet there will still be some form of unity in Europe."

However, months ago Mindful Money's economist blogger Shaun Richards commented that perhaps the best solution to the mess was indeed Germany leaving the euro.

Shaun comments on a post: "…the most obvious and quite possibly the best solution (Germany leaving the Euro) is so rarely mentioned is telling us that Germany is indeed pulling the strings!"

And others agree. John -Erik Horne said earlier this year on Seeking Alpha: "In contrast to the weaker members a strong member, e.g. Germany, could leave the Euro zone and would have a different worry altogether, i.e. currency appreciation…But this scenario offers options with benefits for all parties involved. This is a scenario which offers hope for the future."

Once the stronger members have left the Euro zone the weaker members truly own the Euro. And they can finally do what is desperately needed and greatly depreciate its value so that the competitiveness of their economies is increased. This offers the potential of new growth for these suffering economies.

What do you think?

 

More on Mindful Money:

Future winners of the European Championship

Who's to blame for the Eurozone crisis? We all are

How to survive the Eurozone apocalypse

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