Friday, May 25, 2012

Dollarization of Greece?

We now know that the Euro is based on a flawed design. The region has no centralized fiscal policy with vastly different political philosophies and social institutions, and no way to credibly sanction wayward countries. Therefore, there is no reason why the types of upheavals we now see will end. The lack of fiscal discipline is core to the problems of the Euro. 

In the late 1990s, Ecuador was facing a similar situation.  The country dollarized the economy, removing fiscal and monetary discretion from the politicians.  After a short period of intense economic hardship, the country has been on a steady path of growth. Even with the recent loss of fiscal discipline, as seen by the actions of the current U.S. administration, the size of the U.S. economy provides the stability that individual small countries cannot do for themselves. Greece and the other at-risk EU economies should consider dollarization.  It's radical, somewhat old fashioned but it can work.

2 comments:

  1. please could you point me in the direction of work on this, for my own interest.
    my views can be found here:-http://nipperandfriends.blogspot.co.uk/2012/05/greece-trispras-and-dollarization.html

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  2. what is dollarisation? If a country ,say greece uses it own currency drachma with euro than would it mean "dollarisation"???

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