Greece, outside the European Monetary Union, would likely have the high interest rates it is suffering
today in the bond markets, no access to international capital markets (like Argentina), no assistance
with bailing out neither government nor banks, rampant imported inflation, and a sharp decline in real
wages. Greek import demand is not very sensitive to price changes. This means that the negative hit
from higher import prices is likely to outweigh the positive effect from lower export prices, unless the
Greek can find a way to rely less on imports. Rather than diminishing the pain in Greece, an exit from
the euro would exacerbate it. This is why we prevail in thinking that a face-saving solution will be found.
