A leading German critic of Berlin’s handling of the eurozone financial crisis on Saturday called for Greece to leave the euro, arguing that the latest deal clinched by eurozone finance ministers will do little to solve the Mediterranean country’s economic woes.
“Additional money is nothing but a pain reliever for the Greek disease and does not help with the healing process,” said Hans-Werner Sinn, head of the influential Munich-based Ifo economic institute.
“Greece has become too expensive as a result of the euro and needs to be cheaper to regain its competitiveness,” said Sinn. “This is only possible through exiting the euro and the devaluation of the drachma.”
Greece replaced its own currency, the drachma, with the euro in 2001.
With financial support from the European Union and the International Monetary Fund due to run out at the end of next week, Athens managed to hammer out a deal with eurozone partners late on Friday to extend its bailout by four months.
However, the Ifo institute recommends that Greece negotiate the conditions for an orderly exit from the 19-member eurozone.
These would include a debt moratorium, which would reduce the debt held by the Greek state, commercial banks and the nation’s central bank, he said.
At the same time, Greece should launch a reform programme that would eventually allow it to return to the eurozone.
Under the Ifo plan, Athens would remain an associate non-voting member of the euro system. SAPA