The cure for Greece? Bankruptcy and the drachma - by George Athanassakos

By 2014, based on estimates by EconomyWatch.com's Econ Stats database, Greek debt will reach 150 per cent of GDP from about 125 per cent in 2010, surpassing even Japan.

And this number may be on the conservative side as some analysts estimate that debt is already marching toward 180 per cent of GDP. Based on current interest rates on Greek debt, even if the Greek economy grows by an optimistic 3 per cent a year, it will not be enough to pay the interest on the debt – and the debt will just keep growing and so will the debt-to-GDP ratio.

The best scenario would be for Greece to declare bankruptcy, go back to the drachma, and devalue its currency. This money illusion will make Greeks feel better in that their salaries will not get cut in drachma terms even though in essence they will be poorer as all imported goods will cost more. But impressions are everything and the perception of lighter austerity measures may prevent social unrest. At the same time, exports will become cheaper and the Greek economy more competitive, which will boost Greece's efforts to repair its economy.

 
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