In what can be called a Euro humiliation, Greece signaled it may ditch the EU currency, going all in for the US dollar in the near future.
It sounds pretty sensational, but you must consider the source first, as the claim was made by President Donald Trump’s pick as EU ambassador. According to professor Ted Malloch, senior Greek economists are seriously considering the possibility of adopting the US dollar if Greece will be kicked out of the Eurozone.
Ted Malloch alleged that the Greek government is nothing short of desperate and it’s prepared to follow into the steps of Puerto Rico, i.e. to tie the Greek currency to the dollar if that’s what would take to leave the EU currency and prevent an economic collapse.
Also, the professor said that German leaders, including Angela Merkel, were freaked out at the possibility of Greece quitting the euro for the greenback, which would be humiliating for Brussels and Berlin alike.
Greece ditching the Euro and adopting a rival currency is a catastrophic scenario in the minds of the Eurocrats and it would mark the beginning of the end for the EU project in its actual hyper-centralized Germany dominated form factor.
A temporary tie of the (reissued) Greek drachma to the US dollar can help with keeping the country’s currency afloat if Greece chooses to leave the Eurozone.
In an interview with the Greek broadcaster Skai TV, Ted Malloch said that quitting the Eurozone will be great for Greece as the current situation is basically unsustainable:
“I know some Greek economists who have even gone to leading think tanks in the US to discuss this topic and the question of dollarization. Such a topic of course freaks out the Germans because they really don’t want to hear such ideas.
Greece might have to sever ties and do Grexit and exit the euro. It needs debt restructuring, it really needs debt relief, and I know people in Europe don’t want to hear that.
They need to reduce the debt overhanging and that means frankly something that people in Germany and elsewhere have not been able to accept, it means a haircut to the lenders and to the banks in Germany and probably, at least in my perspective, a return to the drachma.
So the problem then is who will manage that transition, and how, to avoid all the chaos and all the instability.”
Greece’s finances will be “audited” this month, and the country faces the prospect of running out of cash again unless another bailout deal will be agreed with the EU. Previous bailout deals forced the Greek government to take devastating austerity measures that suffocated the economy, which was kept afloat with German cash.
The country’s debt is already huge and arguably impossible to be paid, making analysts to fear that Greece will fail to close a new deal with the EU and it will eventually crash out of the Euro.