Un poco datato ma espone la visione della BcE su quelli che sono i due scenari per la Grecia, il piano concordato nel memo (A) e quello eventuale di ristrutturazione (B).
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There is widespread scepticism among academics, financial market participants and observers about whether Plan A will work, particularly in the case of Greece, because it is too harsh, it imposes too many restrictions and would ultimately be politically unsustainable. Plan A is for countries with liquidity problems, while Greece – they argue – has solvency problems. If Plan A is not viable, there is only one alternative – Plan B.
It’s not very clear what Plan B is. Some regard it as an ‘orderly’ debt restructuring by Greece, with a substantial haircut for bondholders which would alleviate the country’s debt burden. A further elaboration of Plan B also entails a return to the national currency – the drachma – with a devaluation which would allow competitiveness to be restored.
The consequences of Plan B have not been considered in detail by its proponents, but this is considered as a secondary issue, to be assessed at a later stage.
That’s the main reason for the difference of view.
Those who have seriously studied Plan B, in all its details, know that it is not only much harsher for the people of Greece, and for the other European countries. What’s more, it doesn’t work. And because Plan B doesn’t work Plan A is the only viable solution. Let me elaborate on this.
First, experience has shown clearly that within an economically integrated area like the euro area a currency devaluation does not allow a growth stimulus that would support faster fiscal consolidation. The countries which devalued their currencies - as Italy did after leaving the ERM in September 1992 - suffered large interest rate spreads for a protracted period, because of renewed uncertainty about the monetary regime after the devaluation as well as about the fiscal system. After each devaluation, inflationary risks rapidly appeared, which required more monetary tightening than would be the case within the euro. In fact, several countries, like Belgium, Ireland and the Netherlands, implemented their fiscal consolidation programmes while maintaining a stable exchange rate and a high primary budget surplus (i.e. net of debt interest).
Another aspect that is often ignored is that the return to a national currency is not an event comparable to a change in parity in a pegged exchange rate regime. It would involve a renegotiation of all contracts, especially financial ones, within individual countries and between residents of different countries, with conflicting interests between debtors and creditors. In the event of legal disputes the international courts would be inclined to rule against the country which had decided to change its currency of denomination. This means that residents of that country would be severely affected by a change in the denomination of their contracts. A debtor country which imports capital from the rest of the euro area and devalues its currency would immediately suffer from an increase in its debt burden, which would exacerbate its difficulties. The country would probably suffer from an attempt by the population to maintain the euro as a unit of account and means of exchange, leading to parallel circulation.
To sum up, given the financial and economic integration achieved over recent years in the euro area,
the possibilities voiced by some about a country abandoning the euro or about reconstituting the euro area in a reduced form would have highly detrimental effects on everyone, be they net creditors or debtors. It would be in nobody’s interest.
Even without leaving the euro area, a debt restructuring which would entail a
substantial haircut for bondholders would hammer the domestic financial system and have serious repercussions on the real economy. As many countries which have undergone a restructuring in the past know well,
access to capital markets would be impaired for many years, affecting not only the government but the whole country, with severe effects on the private sector. Finally, a restructuring would also have major political consequences if the loans made by the other euro area countries were not repaid in full. Greece’s access to the Cohesion Funds would most probably be called into question.
To sum up, Plan B would not put Greece in a sustainable position for the long term and would have a lasting economic impact on society. Greece would end up being politically marginalised in the European Union. The Greeks authorities know this.
Plan B would also have strong contagion effects on the other countries, starting from those with weaker fiscal positions, inside and outside the euro area. Such contagion effects have already materialised to some extent.
Plan A is preferable. All parties involved, both in Greece and in the euro area, have a strong incentive to ensure that it works.
ECB: The financial and fiscal crisis: a euro area perspective