A devaluation is thus the only realistic solution. Capital Economics has investigated how eight economies with large external debt burdens fared after their exchange rate fell precipitously following an economic crisis. The outcome was mixed, with winners as well as losers, but on balance the policy significantly improved their competitiveness. The episodes examined in the paper are Mexico (1994); Thailand, Indonesia, South Korea and Malaysia (1997); Russia (1998); Argentina (2002); and Iceland (2008). The great downside is that inflation soared in all eight cases following the devaluation, and especially during the two years that followed. Some countries, such as Malaysia and South Korea, were able to contain inflation to below 10pc a year, but it hit 82pc in Indonesia and 126pc in Russia, according to the Capital Economics research. Prices eventually came back under control, but the damage was done.

If you are a Greek citizen with lots of cash and non-indexed sources of income, you have a great deal to lose if Greece leaves the euro.

The good news, for the economy as a whole if not for those on fixed incomes, is that this surge in inflation tends not to be enough to wipe out the extra competitiveness from the collapse in the currency. Four years after the crises and subsequent devaluations took place, real exchange rates remained 20pc lower in the eight countries featured in the study.

In Russia, prices soared by more than 100pc in the year following the 1998 economic crisis, but the rouble fell by 75pc, which means that on balance exports became significantly more competitive.

Needless to say, currency crises are painful: besides excessive inflation, they tend to trigger severe banking collapses. Greece would be bound to suffer in the short term if it left or was expelled from the euro, but it would also bounce back sooner rather than later.

Economies shrank by an average of 6.5pc in the 12 months that followed the crises, with household consumption collapsing by 9pc, the Capital Economics study shows, but in seven out of eight cases they started to grow again the following year. The only exception was Iceland: its woes were so great that it took longer to start to recover. Economies that fared best, not surprisingly, were those with – like Greece’s – plenty of spare capacity.

Europe’s leaders need to accept that Greece cannot thrive unless its debts are written off, and that this wouldn’t be acceptable to other countries unless it also exited the euro. For everybody’s sake, it is time to set Greece free.

David Fuller's view

It would be hard to refute any of this empirical evidence.  However, the person most likely to appreciate it – Mario Draghi of the ECB – is not part of the negotiating team dealing with the Greek problem.  Moreover, the Euro has always been a political rather than economic construct.  That needs to change, in the best interests of all Europeans.