Lapavitsas on Greexit
Costas Lapavitsas, who is now a member of parliament for Syriza, on Greexit, which he sees as the best option.
"There are three stages. First, as I said, is the negotiated, consensual, orderly exit.
Second stage is recovery and that would depend very much on recovery of domestic demand which is very heavily repressed in this country. There are vast resources lying unused. Small and medium enterprises would be reactivated, that’s what would really restart the Greek economy. Not exports - this worship of exports is nonsense.
But obviously that is not really a path for sustainable growth. What Greece would need after that would be an industrial policy to restructure its productive base, to integrate itself in the world economy on a different basis. That would take a few years.
But Greece would be still part of a common market, as a member of the EU. So it is not so easy to go back to domestic demand and to the SMEs, because it would have to kick out the big companies that could still sell cheaper.Read the whole interview here. My guess is he is assuming that it would give competitive advantage to domestic production, and allow for growth without increasing imports too much. Costas seems to be less hopeful about the effects on exports, which would seem reasonable. I would suggest that relying on the exchange rate would not be sufficient, and that some sort of import substitution would be necessary too.
I believe that Greece could out-compete imports very easily. Unfortunately, wages have been destroyed during the last 5 years due to bailout policies. A devaluation of 15-20% (but no more since as I said the ECB would defend the exchange rate) would give a tremendous competitive advantage. Wages would then gradually rise again."