Is the Drachma really such a dirty word?

It’s been difficult at times to follow the unfolding Greek tragedy. Partly, it doesn’t make very easy reading. Mostly, it’s just hard to fathom what’s going on.

The latest twist, to call a referendum on whether to accept the bail out, seems extraordinary.

It’s hard to imagine how the question could be anything other than a variation on: “do we (a) accept the handout and keep our economy vaguely going or (b) go to hell in a handcart?”.

More thoughtful commentators have characterised that second choice as going it alone outside the Euro which may well be what it means.

Current crisis apart, is that such a bad question?

One of the consequences of the recent Euro crisis is that the currency appears to be over valued. In other words, holidays in Europe are not cheap. More specifically, cheap and cheerful holidays in Greece, paid for with the Euro seem prohibitively expensive.

Say what you like about the Drachma but it is hard to imagine that under the old currency many of Greece’s economic problems would not have been self-correcting with an exchange rate left to find its own value. In doing so, it would also see us all topping up our tans in the islands before returning home arms laden with cheap booze, tabs and olive oil.

That may sound simplistic, but isn’t that exactly how economics works: people sell what they are good at or have in abundance at prices which others can afford and are willing to pay.

The Euro’s apparently inflated value has priced Greece out of the tourism market, so upsetting the balance of the rest its economy and without showing any alternative routes back.

Current crisis apart then isn’t George Papandreou, the currrent Greek PM, at last proving that someone can behave responsibly and take a long-term view.

For sure, the timing was never going to be perfect (and French and German criticism of Greece for being self serving seems comically un-self aware) but surely if the Euro is in a hole it is better to stop digging.