Ex-Bank of England boss sees a way to a ‘rapidly growing’ Greece

If Greece were to leave the eurozone, it would face “pretty horrendous” times in the short term, a former head of the Bank of England said. But after 2 1/2 to three years, it would have a “rapidly growing” economy and falling unemployment, said Mervyn King, who ran the Bank of England from 2003 to 2013.

[…]

All, he acknowledged, are “unpalatable choices,” which is why politicians prefer “muddling through.”

Here are his four:

— Continue with high unemployment in some eurozone countries until wages and prices fall enough to restore economic competitiveness. That, he noted, would be quite painful.

— Encourage higher inflation in Germany, perhaps 5% for five years, and restrain wages and prices elsewhere to eliminate the competitiveness gap. While it would be the least painful, it would be the hardest to achieve, he said.

— Accept indefinite transfers of cash to weaker eurozone members in southern Europe. But it’s unclear how that could be done without conditions imposed by countries providing the cash—which he forecast could exceed 5% of gross domestic product—and resistance to those conditions by the recipients.

— Accept a partial or total breakup of the eurozone.

via Ex-Bank of England boss sees a way to a ‘rapidly growing’ Greece – MarketWatch.

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