Greece faces the terror of state bankruptcy. No longer is there any deception that membership of Europe’s economic and monetary union provides security from harsh realities. Since Greece entered the euro union in 2001,Greece has sacrificed competitiveness and accumulated tremendous trade deficits. Theoretically, to make up the economic ground lost in less than a decade, the Greeks would require depreciating its currency by 40 per cent. But in a European union, that is impossible.

There is no shortage of ideas to help the Greeks, including aid – a plan that would contradict the “no bail-out” rule shrine in the treaty formulation. There is, sadly, only one way to break loose this vicious cycle. The Greeks will have to abandon the euro, reestablish the drachma and return to the still-existing exchange rate mechanics of the EU system, the so-called ERM-II, which in 2001 was departed by Greece in 2001.
It is reasonably clear thatGreece has run out of choices. The country has adopted austerity of near- unheard-of severity, cutting government expenditure, raising taxes and dismaying salaries. This union completely discounts Keynes theory that states must face crises with counter-measures to support demand. The Greek action is painfully resonant ofGermany’s ill-fated moves to cut spending in the 1930s depression, which taught the world that clipping budgets to please creditors in a depression yields high unemployment and radicalizes society.