Let Spain, Greece (and maybe Italy) Exit the Eurozone Temporarily, Devalue and Grow

Wednesday’s favorable German court ruling is a major step forward for European Central Bank head Mario Draghi’s proposed unlimited sovereign-bond purchase program to rescue the eurozone. But even if implemented, it misses the most pressing problem — a desperate need for short-term economic growth. The best way to achieve that: a temporary exit from the eurozone by Spain, Greece, and possibly Italy that would allow for major devaluations, says Wharton finance professor Franklin Allen. Once growth redresses regional imbalances, the countries could rejoin the currency union.

For more comment from Franklin Allen on the new proposal by Draghi and the ECB, see:

Last Chance Café – Will the ECB Finally Become a Bank of Last Resort?

Don’t Expect Long-term Relief from the New ECB Funding Proposal

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Let Spain, Greece (and maybe Italy) Exit the Eurozone Temporarily, Devalue and Grow. Knowledge@Wharton (2012, September 12). Retrieved from http://knowledge.wharton.upenn.edu/article/let-spain-greece-and-maybe-italy-exit-the-eurozone-temporarily-devalue-and-grow/

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