Ditch the euro — it's easy!

Simon Johnson, in talking about the ongoing eurozone crisis, says that, while it's not quite as easy as pie, it would be relatively easy for some countries, say the PIIGS, to ditch the euro. Why? He looks back to Depression-era Europe and notes how easily many countries went off the gold standard.


That said, one country going off the gold standard inspired or compelled others to do the same. So a mad rush for the euro exits would probably inspire more.

And, regarding austerity issues, leaving the euro could cut both ways. Germany might decide to leave the euro because it looks too weak, or, if a new French government tries to dump on Germany.

And, per Johnson's analogy, leaving the gold standard didn't immediately end the Depression.

Given that different of the PIIGS face what they do for different reasons, leaving the euro might or might not help. Spain and Portugal face the implosion of a housing bubble. Maybe they need to nationalize local banks, then implement a Tobin tax on non-nationalized banks to ding the Germans. Ireland might be in a similar boat.

OTOH, would Germany, or the UK, invest in them in the future then?

Greece? Its problems, of corruption and tax evasion, are self-inflicted. It shouldn't have been admitted to the eurozone, in the first place.

Italy? It's halfway in the Grecian urn, though not totally.

Leaving the euro, of itself, probably wouldn't help Italy and definitely wouldn't help Greece. Until Greeks own up to that, nothing will help them, anyway.

So, Johnson is half right. Ditching the euro is easy. Helpful? Maybe not so much.