Sweden tells Greece to quit eurozone

In remarks that will send Brussels, Berlin and Athens wild, Sweden says Greece should quit the euro to boost its economy

by The Commentator on 13 October 2012 07:48


Sweden's Finance Minister has told Greece that it would be best advised to quit the Eurozone and revert to the drachma if its economy is to stand any chance of recovery. 

In remarks that are certain to cause consternation in Brussels and Berlin as well as Athens, Finance Minister Anders Borg said that abandoning the euro would probably allow Greece to "find its competitiveness once again" and "get itself back on its feet".

The minister's remarks were quoted by the Swedish newspaper, The Local. He was speaking on the sidelines of a summit of the International Monetary Fund (IMF) in Tokyo on Friday. Borg acknowledged that quitting the eurozone would be a difficult and complex road to tread but argued that, "it is difficult to see another that could work."

Sweden is a member of the European Union but not of the eurozone. Nonetheless, as a successful northern European economy its voice carries considerable weight across the continent. At a time of deep austerity in Greece designed to keep that country inside the eurozone, comments from a respected European finance minister clearly implying that belt-tightening measures are effectively an exercise in futility are unlikely to be well received by the country's government.

Last week, official figures showed Greek unemployment rising beyond 25 percent with the youth unemployment figure now at over 54 percent. The economy continues to contract rapidly with no sign of growth on the horizon.

Many economists regard it is uncontroversial that Greece's only real hope of recovery is to withdraw from the single currency and re-launch the drachma at a much lower effective exchange rate than the one the Greek economy is currently burdened with. This would boost important Greek industries such as shipping and tourism, transforming the country's economic prospects.

However, Brussels, and particularly Berlin, where Chancellor Angela Merkel faces continued controversy for authorising massive bailout packages for Greece, regard the euro as a political as well as an economic project and have predicted dire consequences for Europe should the single currency unwind. Chancellor Merkel has even raised the prospect of a return to armed conflict across the continent should the euro fall apart.

With the rhetorical stakes having been set so high, remarks of the kind made by Finance Minister Borg tend not to be popular in such circles.

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