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Can Greece take a quick holiday from the Euro?

If the Euro is causing Greece all these problems, can't the country just leave the Euro? And if that's too drastic, then, as Martin Feldstein suggests, can't it just take a little break from the Euro? Well, no. Barry Eichengreen explains:

The insurmountable obstacle to exit [is] procedural. Reintroducing the national currency would require essentially all contracts -- including those governing wages, bank deposits, bonds, mortgages, taxes, and most everything else -- to be redenominated in the domestic currency. The legislature could pass a law requiring banks, firms, households and governments to redenominate their contracts in this manner. But in a democracy this decision would have to be preceded by very extensive discussion.

And for it to be executed smoothly, it would have to be accompanied by detailed planning. Computers will have to be reprogrammed. Vending machines will have to be modified. Payment machines will have to be serviced to prevent motorists from being trapped in subterranean parking garages. Notes and coins will have to be positioned around the country. One need only recall the extensive planning that preceded the introduction of the physical euro.

That actually sounds like the insurmountable obstacle is technical, rather than procedural, but either way, the bottom line is still that it's unworkable.

By Ezra Klein  |  February 17, 2010; 1:20 PM ET
 
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Comments

Ezra,

I had to laugh out loud when I read the headline of this post.

It isn't the Euro that's causing Greece the problem, it's the debt and that, in turn, is tubing the Euro.

What was so funny is yours is the same attitude as the communists that were masquerading as regular people, looking in the camera and saying..."We don't need the markets."..... as if finances simply don't matter.

Posted by: WrongfulDeath | February 17, 2010 1:48 PM | Report abuse

That's nonsense. I've lived through 4 changes of currency in Argentina (and countless drastic devaluations) and I can assure you there was no "careful planning" (or planning, period.) It was done mostly overnight.
It was not fun, but it was not a nightmare either. Many other countries changed their currencies too, and there was no major disaster.
If needed, it can be done.

Posted by: CarloP | February 17, 2010 2:05 PM | Report abuse

This may be completely nuts, but would a complementary currency do any good?

http://en.wikipedia.org/wiki/Complementary_currency

From what little I know, probably not, as it seems Greece's main problem is that the Euro has lead to high labor costs and high costs of goods and services in Greece, eroding a competitive advantage vis-a-vis the rest of the Eurozone.

Posted by: Isa8686 | February 17, 2010 2:22 PM | Report abuse

Greece's problems sound very much like U.S.'s problems. Government spending beyond its means during expansions and recessions (so both Bush and Obama at fault). American consumers spending beyond their means. Medicare and social security not sustainable. California going broke. Americans should be so lucky that the USD is the reserve currency.

Posted by: RandomWalk1 | February 17, 2010 2:49 PM | Report abuse

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