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The Greek Run (The Economist)

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Greece’s possible departure from the euro zone has spawned its own term: Grexit. Tension is growing as the June 17 vote nears. Greece’s politicians want to repudiate its rescue deal, but creditors, namely Germany, are refusing to budge. As the exit looks inevitable, advocates find it desirable as the country would gain from a cheaper currency, and the rest of the union could get stronger. Staying in the union would mean downward adjustments to wages and prices entailing budget cuts and structural reforms. Leaving the union, Greece would find itself cut off from foreign funds. A disciplined monetary policy would be required to retain gains from its cheaper currency and stave off hyperinflation. Discipline and reform are concepts the county is not very familiar with. Safeguards will have to be put in place to protect its own banks as well as banks in Spain and Portugal.