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Breaking with the euro will not provide “a chance of properly lifting austerity across the continent”. Default and devaluation and the establishment of a new drachma will not mean prosperity for Greece if Greece’s weak and corrupt capitalist sector continues to dominate the economy.
Take Iceland. This is a very tiny economy with only 325,000 people, the size of smallish city in Europe or the US. It is often presented by Keynesian economists and others as showing a way out of the crisis compared to staying in a common currency. The argument is that Iceland defaulted on its debts and devalued its currency and so recovered its economy (on a capitalist basis), while Greece remains trapped.
I have written on the experience of Iceland in several posts and this story of default and devaluation is just not true (see my post, https://thenextrecession.wordpress.com/2013/03/27/profitability-the-euro-crisis-and-icelandic-myths/) ). Iceland did not renege on the huge debts that its corrupt banks ran up with foreign institutions (mainly the UK and the Netherlands). It eventually renegotiated them and is now paying them back like Greece.
And devaluation did not mean that Icelanders escaped from a huge loss in living standards. They have done little better than the Greeks on that score – although of course, Icelanders started from a much higher standard of living than the Greeks. In euro terms, Icelandic employee real incomes fell 50% and are still 25% below pre-crisis levels.
full: https://thenextrecession.wordpress.com/2015/03/03/greece-breaking-illusions/
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