Monty Python taught us always to look on the bright side of life, and the Bank of Montreal takes that advice to heart in a new report on the Greek debt crisis.
Greece’s economy may be nailed to the proverbial cross much like Brian in that Monty Python movie, but BMO’s Doug Porter has a list of reasons why the world shouldn’t panic about the Greece crisis, even if Greece leaves the euro.
Among them? Cheaper ouzo, Greek yogurt and feta cheese.
“With any new Greek currency (the drachma?) likely to weaken substantially, the country’s exports and visits to the Greek isles will become much cheaper for the rest of the world,” Porter wrote.
Cheaper yogurt might sound like a pretty weak payoff to the crisis that had Greek retirees lining up at closed banks today, wondering when they’ll see money again, but it’s actually one of the strongest arguments made by those who say Greece should just exit the eurozone.
They argue that if Greece had its own currency, it would be able to devalue it, creating, yes, cheaper yogurt and ouzo, but also boosting Greek exports and reducing the burden caused by the country’s public debt. That's pretty much the policy Canada followed in the 1990s when it needed to pay down an enormous public debt, but Greece, which shares the euro with 18 other countries, doesn't have that option.
“Devaluation couldn’t create that much more chaos than already exists, and would pave the way for eventual recovery, just as it has in many other times and places. Greece is not that different,” Nobel Prize-winning economist Paul Krugman wrote in the New York Times Sunday evening.
Besides the ability to devalue its currency, BMO’s Porter lists off a number of other reasons why Greece leaving the euro would not amount to the sky falling.
He argues the eurozone would be stronger without Greece, showing in a chart that the currency’s wild fluctuations in recent years are linked to events in Greece.
He notes that other European economies are stronger today than they were a few years ago, and the European Central Bank is in a better position than it was in previous years to support any economies that struggle in the wake of a Grexit.
And he also notes one reason not to panic that’s specific to those of us on this side of the pond: Greece’s economy just isn’t that important here.
The country “accounts for 0.05 per cent of U.S. and 0.02 per cent of Canadian exports, so the direct impact on North America is tiny.”
Good news for us here in North America, though it’s unlikely the people of Greece — as they wait penniless for the banks to open — will be cheering that one.
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