A former economic adviser to the government of Lucas Papademos has called on European decision makers to stop toying with the idea of a Greek euro exit, arguing that “Greece’s adjustments so far do not justify its image of failure.”

In an editorial in the Financial Times, Giorgos Pagoulatos, underlines that Greece has made more progress in certain areas than it is often given credit for.

“For example, Greece cut its total primary budget deficit by 8.2 percentage points of gross domestic product over two years (2010 and 2011),” argues the Athens University of Economics and Business professor.

“Doomsayers also look at Greece’s trade deficit and predict it will never restore competitiveness,” he adds. “However, labour market liberalisation and steep wage cuts are delivering the “internal devaluation” required. If labour costs are included, Greece’s effective exchange rate is at its most competitive for more than a decade.”

Pagoulatos argues that the speculation about Greece’s euro membership must stop as it is hampering Greek businesses and privatization efforts. He says that there should be greater focus on growth.

“Greece can return to growth through a double boost of faster structural reforms and a direct investment stimulus,” he writes. “EU instruments such as structural funds and more money from the European Investment Bank and the European Investment Fund would help.”

Pagoulatos concludes that a Greek exit would be counterproductive for the eurozone.

“There is another absurd argument put forward by some in Brussels: Greece must go because its public debt is not sustainable,” he writes. “But most of its public debt is held by the non-private, official sector. Exit would render this debt unserviceable. Greece would be forced to default, generating large capital losses in other European countries and poisoning relations for years.

“If Europe were to accept a Greek exit it would raise the risk of full eurozone break-up. The claim to an irreversible monetary union would be shattered. The eurozone would surrender to endless speculation over which country would be next.”