Grexit was narrowly averted in summer 2015. Nevertheless, the view that Greece might be
better off outside the Euro area has never really gone away. Moreover, although Marine Le
Pen’s bid for the French presidency was frustrated in May 2017, in Italy a disparate coalition,
encompassing Beppe Grillo’s Movimento Cinque Stelle as well as Matteo Salvini’s Lega Nord, has
called for a referendum on exiting the Euro. In this context, our argument that Grexit cannot
save Greece may be of some relevance to national debates elsewhere in Europe. The paper
examines the case for Grexit by offering a detailed account of its likely effects. Its structure is as
follows. Section 2 analyses the transition, with the two currencies (old and new) coexisting.
Section 3 charts the challenges facing the Greek economy in the short term, after the new
national currency has become legal tender. Section 4 assesses prospects in the medium term,
with Grexit complete and the new currency drastically devalued. Section 5 reviews the
underlying weaknesses of Greece’s growth regime and explains why these are unrelated to the
nominal exchange rate. Section 6 discusses the conditions for an investment-led recovery, and
shows why tackling them would be more difficult outside the Euro area. Section 7 sums up
and concludes