Hot News - Greece Economy Has Prospered Due To Its EU Membership!

So the Bank of Greece, which notably is not under Greek Government control but rather is more closely aligned to the ECB, submitted a monetary policy report to the Greek Cabinet and Parliament this morning.  While its message is clear, I am not so clear on where the Bank of Greece gets the support for one line in it.  I will not spoil the suspense for you.  Go ahead and see if you can figure out for yourself which line confuses me:

"As the Bank of Greece had assessed in its Governor’s Report for the year 2014, the conclusion of a new agreement with our partners is of the utmost importance to fend off the immediate risks to the economy, reduce uncertainty and ensure a sustainable growth outlook for Greece.

Failure to reach an agreement would, on the contrary, mark the beginning of a painful course that would lead initially to a Greek default and ultimately to the country’s exit from the euro area and – most likely – from the European Union. A manageable debt crisis, as the one that we are currently addressing with the help of our partners, would snowball into an uncontrollable crisis, with great risks for the banking system and financial stability. An exit from the euro would only compound the already adverse environment, as the ensuing acute exchange rate crisis would send inflation soaring.

All this would imply deep recession, a dramatic decline in income levels, an exponential rise in unemployment and a collapse of all that the Greek economy has achieved over the years of its EU, and especially its euro area, membership. From its position as a core member of Europe, Greece would see itself relegated to the rank of a poor country in the European South.

This is why the Bank of Greece firmly believes that striking an agreement with our partners is a historical imperative that we cannot afford to ignore."

Figure out yet the line that confuses me?  I think you have.

Let's consider a few stats and see if we all agree.  The EU was formed in late 1993.  Around that time the Greece unemployment rate was hovering around 9%, which is not great but it is much better than where it is today at around 25%.  At the time the EU was formed Greek government debt to GDP ratio was under 80% and now is well over twice that, pushing 180%.  Indeed, even before the great recession they were already over 100%, so you cannot blame it all on the recession.  Private sector debt as a percentage of GDP has also more than doubled. 

We could go on, but there is plenty of press out there about how bleak the situation is in Greece today.  And let me add that if it were not part of the EU it would not have to face collective creditor demands on austerity and could have negotiated bigger haircuts long ago in my view, or at least dealt with the debt by devaluing its currency and incurring some short term high inflation, kind of like Iceland did, which the IMF, one of Greece's creditors, cites as exemplar.  But hey, with things going so swimmingly in the EU, why would they ever want to do that.