1. The Greek disaster and the future of the EMU
Costas Lapavitsas
SOAS/RMF
November 2015

2. What kind of crisis in the Eurozone?
Not a public debt crisis
Spain, Portugal, Italy
A crisis of competitiveness and balance of payments surpluses
A part of the global crisis of

3. The mechanism of crisis
Loss of competitiveness
Current account imbalances
Capital flows from core to periphery
Domestic financial expansion
Public and private debt accumulation

4. Nominal Unit Labour Costs (AMECO)

5. Policy response Germany clung to the Euro and hardened its mechanisms
Liquidity to protect the banks - ECB
Permanent austerity – “six-pack”, “two-pack”
No significant debt restructuring
‘Reforms’ for competitiveness

6. There is no ‘good euro’ No Eurobonds
Joint and several responsibility is impossible to include in the euro-mechanisms
No regular ECB financing of state borrowing

7. Outcomes Eurozone in long-term crisis – high unemployment, low growth
Crisis moves to the core – Italy and France
Periphery mired in stagnation
Enormous political and social tensions
EMU not viable

8. Investment in the OECD

9. Greek economic and social disaster
25% fall in GDP , U/E at 26%, contraction of industrial output by 35% since 2008.
Incalculable social consequences
Poverty, primary medical care, homelessness, emigration of the young
Entrenched social instability

10. Greek political disaster: Syriza
Complete failure of the ‘good euro’ approach
Full acceptance of EMU policies. Loss of sovereignty
Long-term economic stagnation. Loss of national control over banks
Political betrayal and disillusionment

11. An alternative strategy
Debt restructuring and write-off
Lifting of austerity – no surpluses, no balanced budgets, redistribution
Nationalise banks and establish development banking
Relieving social crisis and restoring labour condition
Medium-term restructuring of the productive sector
Deep reform of the state

12. Exit from EMU Impossible to adopt such strategy in the EMU
Exit to give command over fiscal and monetary policy. No exit from EU
Break out of the trap of the euro
Recover competitiveness
Restructure the economy

13. Modalities of exit Capital and banking controls
Rapid printing of banknotes and use of stamped existing banknotes
Bad bank to deal with bank balance sheet
Devaluation and policies to supply energy, food and medicine

14. For Europe as a whole
Dismantle the EMU. Return to monetary and fiscal sovereignty. No austerity. Redistribution
Management of exchange rates – no free market
Bank restructuring
Industrial policy to boost investment
Rethinking of EU on a looser basis.