“[P]erhaps half the debt burden of Greece today is the result of the design faults of the euro.
After joining the single currency, Greece was flooded with super-cheap credit. Germany’s balance of payments surpluses ballooned from about €50bn when the euro was launched, to about €200bn in 2007, and these were recycled by enthusiastic banks as huge capital flows to the periphery of Europe. Germany built up a huge stock of claims against countries such as Greece, on which it was bound to lose one day.
When all those capital flows went into reverse, Greece, because of the euro, could no longer print its own money, nor devalue its currency to boost its exports, nor cut its interest rates, nor launch its own policy of quantitative easing, nor generate higher inflation to reduce the real value of its debt.”