From the questions (31-35)
Paragraph 1: It has been obvious for some time that the creation of the euro was a terrible mistake. Europe never had the preconditions for a successful single currency-above all, the kind of fiscal and banking union that, for example, ensures that when a housing bubble in Florida bursts, Washington automatically protects seniors against any threat to their medical care or their bank deposits.
Paragraph 2: Leaving a currency union is, however, a much harder and more frightening decision than never entering in the first place, and until now even the Continent's most troubled economies have repeatedly stepped back from the brink. Again and again, governments have submitted to creditors' demands for harsh austerity, while the European Central Bank has managed to contain market panic.
Paragraph 3: But the situation trols in Greece has now reached what looks like a point of no return. Banks are temporarily closed and the government has imposed capital con-limits on the movement of funds out of the country. It seems highly likely that the government will soon have to start paying pensions and wages in scrip, in effect creating a parallel currency. And next week the country will hold a referendum on whether to accept the demands of the "troika" - the institutions representing creditor interests - for yet more austerity.
Paragraph 4: Greece should vote "no," and the Greek government should be ready, if necessary, to leave the euro. To understand this, we need to realize that most - not all, but most of what we have heard about Greek profligacy and irresponsibility is false. Yes, the Greek government was spending beyond its means in the late 2000s. But since then it has repeatedly slashed spending and raised taxes. Government employment has fallen more than 25 per cent, and pensions (which were indeed much too generous) have been cut sharply. If all this is added up, all the austerity measures have been more than enough to eliminate the original deficit and turn it into a large surplus. So why didn't this happen? Because the Greek economy collapsed, largely as a result of those very austerity measures, dragging revenues down with it.
Paragraph 5: And this collapse, in turn, had a lot to do with the euro, which trapped Greece in an economic straitjacket. Cases of successful austerity, in which countries rein in deficits without bringing on a depression, typically involve large currency devaluations that make their exports more competitive. This is what happened, for example, in Canada in the 1990s, and to an important extent it's what happened in Iceland more recently. But Greece, without its own currency, didn't have that option.
Paragraph 6: So have I just made the case for "Grexit" - Greek exit from the euro? Not necessarily. The problem with Grexit has always been the risk of financial chaos, of a banking system disrupted by panicked withdrawals and of business hobbled both by banking troubles and by uncertainty over the legal status of debts. That is why successive Greek governments have acceded to austerity demands, and why even Syriza, the ruling leftist coalition, was willing to accept the austerity that has already been imposed. All it asked for was, in effect, a standstill on further austerity.
Through the examples of other countries, the author is trying to throw light on the fact that
(A) not many countries have been successful at currency's devaluation.
(B) a country has a competitive edge only when it has a currency of its own.
(C) when implemented carefully austerity measures can provide expected results.
