Grexit

Since the economic crisis from 2008, there have been many economic slowdowns in Europe. Some countries get out of the crisis better than others but Greece still defaults on its debt. Greece is one of the most heavily indebted Eurozone countries. Consequently we talk about Greece’s exit from the Eurozone. But it is interesting to know what are the advantages and disadvantages of Greece’s departure from the euro.
If Greece leaves the Eurozone it would become master of its currency again. The return to its old money has consequences. Firstly, Greece will be able to devalue the drachmas and to regain competitiveness. Indeed with currency devaluation the foreigners’ investments should increase. Secondly, this devaluation will also decrease the prices in Greece’s economy and will boost exports who will regain competitiveness. Thirdly, the devaluation enables the regulation of markets when the economy is in recession. Finally, with its currency, Greece would reimburse its financial debt. Thus there will have a hope of recovery.
With the departure of Greece from the euro, the Eurozone would be able to help other countries heavily indebted like Spain, Portugal or Italia.
Nevertheless, the problem is that Greece has a negative trade balance because imports are bigger than exports. This is a reason why a Grexit is not a good solution because the prices of imports will increase in cause of the devaluation. Another important factor is that the purchasing power will plunge/go down. Furthermore, if there is a return to drachmas, there is going to be a currency devaluation, it will be difficult to be back in black and the debt will be more important.
As conclusion, we can say that Greece is in kind of a trap because whatever it chooses it has to tighten the bell, tackle tax evasion and slash the budget deficit. Even if it goes back to drachmas, there’s no guarantee that the expected results will be obtained. Frankly, it could even be worse…