“Commentators, especially from North America, take it for granted that Greece will exit the euro area and will be followed by others… But is a Greek exit really inevitable?

“…If we look at the export performance of EU15 countries since 2008, Spain is the best, followed by Germany, Ireland and Portugal – they outperform even the UK and Sweden, the only two EU15 countries which benefitted from sizeable nominal exchange rate depreciations. Therefore, even if the unemployment situation is miserable in Spain, Ireland and Portugal, their export sectors show signs of hope. But Greek exports look hopeless…

“Consequently, euro-area partners should recognise two major issues and act on them decisively if a cooperative government is elected in Greece:

“1. Greece’s economic outlook is hopeless. A real programme for supporting Greek growth should be put together with very significant investment from Europe…

“2. Greece’s public debt is still too high. The Greek fortune cannot be turned to good without properly addressing the public debt overhang. Greeks were irresponsible in accumulating such a huge debt, but it was a major mistake of official lenders to start the first programme in 2010 without a sizeable debt reduction.

“If a cooperative government is elected [in the Greek elections this weekend], but Europe fails to offer a prospect for Greece, the country will likely subsequently fall back to its current state. Then the scenario of Greek exit and the disorderly and destructive dissolution of the euro area could follow, unless all of the flaws in the euro’s design are corrected promptly, which does not seem to be realistic.”