Titanic brutal austerity will befall Greece if it pulls out of the Euro.
If Greece pulls out of the Euro, the state and much of the private sector will convert wages into Drachma. The drachma will then collapse imploding income levels, dealing instant and crushing austerity that is far worse than is now planned.
Many people think Greece pulling out of the euro would be a retreat from Austerity. It would be the exact opposite and would be a swan dive into an economic collapse not seen in Europe since the 1930s.
There will be instant and brutal austerity in Greece if it pulls out of the euro.
Here is why;
Greece re-establishes the Drachma. It pays its public sector in Drachmas. The drachma initially pegged to the euro collapses and likely halves in value within days. Public sector wages will then effectively halve and the sudden economic impact will be devastating.
The collapse of the drachma appears to the pensioner, government employee and any other employee who’s wages were redenominated into Drachma as a series massive price rises. A 50% collapse in the Drachma looks to them like a 100% rise in prices.
Actually it is simply the global market devaluing a non-ECB backed new currency to its correct economic value. The Greek way of life is torn to pieces.
What follows are demands for massive drachma pay rises. This pans out as a period of hyper-inflation and social strife. After a number of years this inflationary enforced austerity washes out all the Euro distortions and negates state debts.
Greece reverts to type, as a high inflation, middle income country, rebalanced to previous levels of government, pay and entitlements.
The question remains will anti-austerity parties actually trigger an even more draconian austerity on the very people they wish to save from it?