PHOTOGRAPH BY EIRINI VOURLOUMIS

“The Greek financial nightmare is a reminder of why countries benefit from having their own currencies,” David Ignatius wrote in the Washington Post last Tuesday, before the government of Alexis Tsipras grudgingly accepted terms for another bailout. This was “a reminder,” presumably, because there was no need to debate something so axiomatic. “In the old days,” Ignatius continued, “a flexible drachma could have been devalued to boost exports and economic growth.” Economists from Martin Feldstein to Paul Krugman have proposed this cause and effect as a solution to Greece’s crisis since it began, in 2009. Krugman made the point forcefully in his column on Friday, lashing out at European and American austerity hawks and pointing to Canada’s devalued dollar as the reason for its recovery from the 2008 meltdown. “Greece, unfortunately, no longer had its own currency when it was forced into drastic fiscal retrenchment,” Krugman wrote. “The result was an economic implosion that ended up making the debt problem even worse.”

There can be no doubt that, in the case of Greece, critics of radical austerity have the better side of the argument. All agree that the Greek economy has to grow at an accelerating rate if the country is to have a chance of meeting a good part of its debt obligations, however generously they are restructured. Krugman notes that the national debt, which was roughly one and a quarter times G.D.P. in 2009, is, after austerity, one and three quarters times that today. Almost a million people, in a country of just over ten million, worked for the government in 2009. You could insist, as advocates of austerity have, that this was unsustainable, but throwing a third of those employees out of work, cutting remaining public-sector salaries by a third, and drastically reducing pensions, as advocates of austerity did, inevitably suppressed local demand. They could not have expected private-sector entrepreneurs to invest in consumer businesses, either. Creditor banks in Germany will almost certainly have to take some losses to get the Greek government’s ledgers back into balance.

The supercilious tone of northern European bankers regarding southern European profligacy makes austerity proponents’ arguments hard to take, too. To make German unification possible, East Germany effectively received a one-time infusion of three hundred and twenty-billion Deutsche marks, in the early nineties, the equivalent of almost two hundred billion dollars at the time, which included a deal that allowed East Germans to trade their own pathetic marks for West German Deutsche marks at par. It is true, as many European Union leaders have suggested, that there is the issue of precedent with Greece: the more the European Central Bank proves willing to transfer wealth to poor southern economies, the shakier the euro will become. Then again, if the euro were the currency of the richer northern European economies alone, or, for that matter, if a united Germany’s engineering-rich, high-export economy were still on the Deutsche mark, a Volkswagen Golf produced in Wolfsburg would be too expensive to sell competitively in either the U.S. or Asia, no matter how many robots were put on the line. The connection between the value of currencies and the capacity to export cuts both ways.

None of this means, however, that the euro and the free-trade eurozone are inherently bad for weaker economies like Greece's. On the contrary, the counter-proposal of cheapening exports through devaluation presumes an economy that makes things the rest of the world wants. That’s Canada’s, but not Greece’s: the sun can only do so much. Aside from tourism, the Greek economy mainly rests on exporting refined petroleum and processed agricultural products while importing crude petroleum and everything from cars to computers. You can’t devalue the drachma to the point that gasoline production, or olive oil and cheese production, would generate sufficient earnings for Greek workers to pay for cars and computers. (That’s why so many Greek workers borrowed euros on easy credit to buy them.)

Israel is a more telling example than Canada, having suffered an economic crisis much like Greece’s, in the early eighties. Like Greece, Israel had a relatively small, reasonably well-educated Mediterranean population; like Greece, it had a public sector that accounted for at least half of employment, and an economy founded on tourism, agriculture, tax evasion, and corruption. Just before the 1981 election, Menachem Begin’s government seduced poorer, less-educated voters by raising subsidies for consumer staples and removing some tariffs on imported televisions and cars, creating a buying frenzy that Greeks would recognize, along with a huge deficit, and depleting foreign-exchange reserves. Inflation hit in 1984, reaching more than four hundred per cent. Growth stopped, investment plummeted, and a black-market economy, denominated in dollars, grew in its place. All this won Shimon Peres the Prime Minister’s spot. He imposed an austerity that would also be familiar to Greeks, but, crucially, introduced a new shekel, which he pegged to the dollar. (Some Israeli economists even argued that Israel should adopt the dollar.) Successive Israeli governments worked toward a free-trade arrangement with the U.S. and the European Community, and offered significant tax holidays in return for direct foreign investment.

The Israeli government’s decision to keep the new shekel constant and to seek free access to American and European markets was the foundation of the entrepreneurial economy that emerged in Israel during the nineties. Intel, Motorola, IBM, Hewlett-Packard, Applied Materials, Siemens, and dozens of other global companies cautiously opened or expanded operations in Israel, drawn by its relatively low-cost, educated workers and assured of established wage contracts, predictable capital and real-estate costs, and domestic earnings that would not be devalued out of existence. These companies not only brought Israeli operations into their global supply chains but also introduced Israeli entrepreneurs to global customers. They instructed Israelis in how to make things the world needed, with specific technologies, production methods, management principles, logistics, and quality standards. Their intellectual capital made new local business development possible. Dov Frohman, the former C.E.O. of Intel-Israel, told me, back in 1991, that for every global company operating in Israel, four new Israeli companies were founded. Some three thousand Israeli startups were launched in that decade, and annual growth rates ranged from six and ten per cent.

Imagine, in other words, if Greece were not on the euro but the drachma, which might be devalued now and again. Imagine that Volkswagen was entertaining opening an advanced components plant in the port of Patras, with all the investments in training and robotics that requires. How would the company negotiate wage contracts when imported goods (that is, workers' most favored goods) suddenly rise in price, kicking off new rounds of inflation and fuelling local rushes into real estate and new bubbles? How well would Volkswagen and other foreign investors tolerate seeing all their local assets lose a good part of their value overnight, or constantly negotiating prices with local suppliers? How, indeed, would a Greek logistics-and-engineering firm, spinning out of this components plant, negotiate sales in European markets or service European customers? These are not hypothetical questions. If you don’t want to ask Israelis, who are not on the euro, ask the Irish, who are. Ireland faced a post-2008 crisis, too, and is now the fastest-growing economy in Europe.