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by Mike Caswell

Joining the euro zone 12 years ago was supposed to save Greece from the debt troubles it now faces, says the Fraser Institute's Herb Grubel. Speaking to a luncheon in Vancouver on Thursday, Mr. Grubel, a former Reform politician, explained how bad decisions by governments and lenders turned a good policy decision into a questionable one. Despite that, the country is better off if it can retain the euro.

As Mr. Grubel sees it, the country's adoption of the euro was necessitated by decades of poor financial management. Successive governments had been handing out cash at an unsustainable rate and had been printing drachmas to keep the country afloat. This doomed the country to a currency that was becoming severely devalued, leaving Greeks with little buying power.

Many economists placed significant hope on the euro saving the country from itself. Joining the euro zone stripped Greece of control over its currency, forcing it to better manage its public finances as it could no longer print money in times of hardship. In return for giving up this control, the country would have all the benefits of euro membership, such as simpler trade and a stable currency.

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