Sinn: To relieve Greece of its debt with a drastic ‘haircut’

Sinn: To relieve Greece of its debt with a drastic ‘haircut’


By Spiros Sideris – Athens

Conciliatory tones against the euro adopts the president of the institute Ifo, Hans-Werner Sinn, who advocates an active “haircut” of the greek debt.

Introducing in Munich his new book entitled «The Euro Trap» published in English by the publisher Oxford University Press, one of the leading German economist Hans-Werner Sinn, is clearly more in favor of the common currency, maintaining however his objections to the decisions of European leaders to rescue heavily indebted countries. According to Süddeutsche Zeitung, Sinn who -as noted- since he was young, has been a strong European and passionate traveler to Greece, clearly distances himself from the eurosceptic economists of the AfD party (Option for Germany).

He eejects the request of the eurosceptics for “a euro of the North” and “a euro of the South”, knowing the importance of the Franco-German axis to Europe. And not only. “Sinn is in favor of the euro, which he says should be maintained, locating a new gun in firing position: the active haircut. There must be a debt forgiveness to Greece and other countries, despite the fact that this would reward their wrong behavior, says Sinn. In any other case, however, these countries have no chance of recovering”, says the German economist, according to the Süddeutsche Zeitung.

With references to the Greek example, the German Professor of Economic History Economics Florian Schui argues that the policy of austerity in the eurozone has failed and is in favor of new alternative policy approaches to the problems of heavily indebted countries. In discussion with the German economist Rainer Osbild in the economic inspection Wirtschaftswoche, Schui notes that “the objective of austerity in the context of the eurocrisis was to reduce the debt of the countries in crisis and the strengthening of economic recovery. Both objectives have not been achieved, as Greece for example, despite the haircut, now has more debt than before the crisis broke in the summer of 2010. Rather than growing, the Greek economy, but also that of Spain , Portugal and Cyprus, shrunk”, says the German professor.

The view that there are two candidate countries to leave the eurozone, Greece and Germany, states the former chief economist of Deutsche Bank, Thomas Mayer. The current director of the Institute for Research Flossbach von Storch, expects further centralisation in Europe, arguing that monetary policy will change only if people demand this politically or if a new wave of crisis permanently destroys the system. In an interview with the website Deutsche Wirtschaftsnachrichten, o Thomas Mayer talks about his book “The new order of money: Why we need a monetary reform» (Die neue Ordnung des Geldes: Warum wir eine Geldreform brauchen).

In this context, the German economist argues that in his opinion “there are two candidate countries for exiting the eurozone: Greece and Germany. Greece could exit the monetary union, because it cannot cope with the indebtedness in this context. Germany could leave the monetary union, if the latter proceeds to a full monetization of debt. If there is a contraction of the monetary union, the question will arise again, if instead of a single currency it would be preferable to have a community currency, which will compete with other currencies”, says Thomas Mayer.