To Converge or Not To Converge – the Greek Tragedy Continues

Athens, Greece

It seems a long time ago, but when the Euro was introduced, one of the cornerstones for membership and for the long term success of the Euro was convergence of economies within the zone. Convergence does not seem to be on politicians’ lips at the moment but what we are seeing happening across the Eurozone is as much a result of divergent economies as anything else.

Some countries under the cloak of the Euro borrowed way beyond their means, creating a false convergence of kinds in government coffers. The bond markets lent and the countries spent. Now the Eurozone finds itself in a difficult position, devaluation of individual currencies has been replaced by austerity and bailouts at the same time as the cost of the historic borrowing rises, dragging more and more money out of an already stressed economy.

So where does it end? We are in largely uncharted water at the moment – the Greeks have voted for more of the same “medicine” and to try and stay in the Euro. But this is an untested treatment and if one was to use a pharmaceutical analogy there is no certainty the treatment would get past the drug regulators as safe for human trials.

The situation is serious and the infection is spreading, if it was a medical decision to save a life maybe if would be safer to opt for a treatment that had been shown to work. But the Greeks seem to have chosen the new treatment – let’s hope they are right.


You may have an interest in also reading…

IFC: Addressing Climate Change Can Unlock $23 Trillion-Dollar Investment Opportunities in Emerging Markets

By Christian Grossmann and Thomas Kerr The historic Paris climate change agreement entered into force in record speed last November,

World Bank: International Food Prices Hit Four-Year Low

New World Bank Group tool focuses on preparedness for potential future crises. International prices of food decreased by 6 percent

Hans Peter Lankes, IFC: IFC’s Development Impact, One Market at a Time

Having worked in the international financial institutions for much of my career, I’m a big believer in the power that