The euro is a serious matter; it is not just a currency. It is like the honor of Europe.

How would you respond if you were asked, "in whose shoes would you like to be"? I think that no one would ever want to be in the shoes of Yorgo Papandreou. He became the Prime Minister of Greece in the midst of the crisis and has had to undertake one of the most critical decisions for the country. There are two ways ahead for Greece: it will either abandon the euro and go its own way, or focus on austerity measures tailored to protect the euro. If he takes the second path, it will torture the Greek people and lose him votes. But what if he follows the first path? Will he earn votes if he decides not to protect the honor of Europe? I do not think so. Let me tell you why.

Please let me begin with defining the problem. Greece's old problem is the same as that of Turkey. Do not tell me the old "they are lazy, we are hardworking" story. Listen to me first. Though the structure of Turkish economy and Greek economy are different, the problem is the same. Is it because we are the remainders of the same empire? Historians must analyze this. Both Greece and Turkey suffer from current account deficit. This has always been the case with Greece, just as it has with Turkey. What is the main problem in Greece? Just like Turkey, they consume more than they save. They spend more than they earn.

European Union membership has facilitated Greece's high current account deficits. The shift to the euro has augmented the deficit further. This was how the ratio of current account deficit to national income exceeded 12 percent in 2006. When I see these figures, I remember saying a couple of years ago that "Greece's problem is definitely a concern for the European Union."  What has eased the finance constraints for Greece has been the European Union membership and the euro directly since 1999. We should have expected this from the beginning, I believe. The European Union from the beginning should have started to recommended sounder fiscal policies to such countries. Greece joined the EU in 1981 as the tenth member of the Union. The EU should have taken steps to this end back in 1981, but it did not.

In the current circumstances, what should a country do to control the current account deficit problem? It either reduces the disposable income of consumers to tighten the demand or depreciates the currency, increase the relative price of foreign goods, keep the current nominal income constant and thus tighten the demand. You can do both at the same time. But tightening the demand is the only option in any case. In this sense, a country like Turkey has to make a single decision. The government has to decide whether or not it will introduce measures to reduce the disposable income of the people. This was why the government played a number of tricks to manage the game before the elections. If the government chooses not to fulfill its responsibility, the price adjustment will be ensured by markets via the exchange rate, in the case of Turkey. The measures mobilized by the government will determine whether this adjustment will be a light one or a harsh one. But in the case of Greece, the government does not have a single option. The market cannot automatically ensure the price adjustment. Their currency is no longer the drachma, it is the euro. So, the Greek government must make two decisions: it will decide how much to tighten the disposable incomes of people on the one hand, and decide whether to abandon the euro on the other. As you might remember, Argentina declared a moratorium, FX resources evaporated, then the exchange rate adjusted itself and in the end a new world was build. Argentina was one of the countries that recovered most rapidly after the crisis.

It is difficult for a politician to reduce demand by lowering individuals' incomes. This part I can understand. But is it as difficult for a European politician to abandon the euro? It might be, according to a survey on "New Europeans" introduced by Eurobarometer in April 2011. The survey asked "what are the leading elements of European identity?" 36 percent of the survey participants said the euro. The usual answer used to be "democratic values," which received only 32 percent of the votes this time. In Greece, the ratio of those who consider that the euro is the leading element of the European identity is 53 percent. How about that? Greece is between the devil and the deep blue sea. If you abandon the euro in order not to torture your citizens, some part of society, most probably the well-off section that will be damaged less by the torture, will shout "You have disturbed our European identity!"

Papandreou's task is difficult. Let me finish with a note for those who are curious: the ratio of those who consider the euro as a leading element of European identity is 59 percent in France and 38 percent in Germany. The euro is a serious matter; it is not just a currency. It is like the honor of Europe. This implies that we can somehow manage the game. Recall our principle: if they can somehow handle the process, Turkey can play the extra time.

This commentary was published in Radikal daily on 21.06.2011