Short extract from a long interview with Hans Werner Sinn, the director of the Center for Economic Studies at the University of Munich. It was published by Spiegel.online on June 16.
SINN: The basic problem is that Greece isn’t competitive. The cheap loans that the euro brought the country artificially raised prices and wages – and the country has to come back down from this high level.
SPIEGEL ONLINE: So the euro countries shouldn’t approve the aid?
SINN: They should give them the money to ease their exit from the currency union. The Greek government could use the money to nationalize the country’s banks and prevent the state from collapsing. The state and the banks must continue to function through all the turmoil that an exit will entail.
SPIEGEL ONLINE: This turmoil would hit the population hard.
SINN: Yes, undeniably. But the turmoil would only be temporary, it would last one to two years perhaps. This time would have to be bridged with the financial aid from the international community. But the drachma will immediately depreciate and the situation will stabilize very quickly. After a short thunderstorm, the sun will shine again.
• • • •
Hans Werner Sinn is also the author of a guest column in The New York Times, “Why Germany is Balking at a Bailout” (June 12). This is an extract.
Some critics have argued that Germany, having benefited from the Marshall Plan, now owes it to Europe to undertake a similar rescue. Those critics should look at the numbers.
Greece has received or been promised $575 billion through assistance efforts, including Target credit, E.C.B. bond purchases and a haircut after a debt moratorium. Compare this with the Marshall Plan, for which Germany is very grateful. It received 0.5 percent of its G.D.P. for four years, or 2 percent in total. Applied to the Greek G.D.P., this would be about $5 billion today.
In other words, Greece has received a staggering 115 Marshall plans, 29 from Germany alone, and yet the situation has not improved. Why, Mr. Obama, is that not enough?