Greece adopted the euro in 2001 despite severe structural problems and very high deficits and debt-to-G.D.P. ratios, using creative accounting to cover up that reality. It was also notoriously known for its corrupt political culture and its kleptocratic capitalism.
In short, Greece was not fit to join the euro and should have not have been accepted into the euro club.
Joining the euro has not produced any tangible benefits for the Greek economy. In fact, it has undermined Greece’s competitiveness, increased inequality and produced a series of bubbles across the economy. Foreign banks lent carelessly to the Greek state. Of course, everything fell apart after the global financial crisis hit Europe’s shores.
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Still, the mainstream political class in Greece, including Syriza, remained firmly committed to the euro. The inclusion in a European monetary union gave an insecure and backward-looking nation a sense of importance and provided a false security blanket. In the meantime, no major political party was willing to undertake the much-needed reforms that both the Greek economy and society needed to move forward. To this day, the authorities are unable to enforce even a smoking ban because so many people are unwilling to conform to the existing laws on smoking in public places. A competent Greek bureaucracy remains a chimera.
Greece should have defaulted on its debt back in 2010 and left the euro zone. But it didn’t. Instead, a succession of governments enforced anti-growth and anti-social policies as part of the bailout programs rather than making the tough decision to leave the euro.
The Syriza-led government followed in the footsteps of the previous governments, refusing to embark on a national dialogue about the pros and cons of the euro. As a result, most Greeks are ignorant about the real impact of the euro on the Greek economy and continue to support it.
At this stage in the game, though, after five years of deepening economic crisis, an exit from the euro carries enormous risks.
So while Greece needs to leave the euro, it simply cannot afford to do so. The transition from the euro to a new national currency would require that Greece become highly efficient and productive in order to survive in a globalized environment in which it now imports nearly 90 percent of all the products it consumes.
To do so, it would have to embark on major public sector institutional reforms and change its political culture rapidly. But there is no evidence so far that the political class in Greece is either capable or willing to execute this task.