Greece as a Danger to Euro Stability

by Andreas Hoffmann*

Entering the Eurozone, Greece handed over monetary policy to the European Central Bank and introduced the euro. In a formerly unstable economy, without the danger of depreciation, the risk premium on Greek interest rates shrank to less than half a percent above that of Germany. This brought about convergence of the Greek interest rates. Thus investment and debt could be financed at lower rates. But the advantages from entering the eurozone also have a price. Continue reading