Greece has many problems in regards to its move to the Euro, and the value of the currency is really one of political control rather than one of the value of whatever it is that Greece produces. In the past, the Greek government was able to avoid debt or bad fiscal management policies in terms of deficit spending on government programs simply by devaluing the currency (printing/releasing more of it) and to engage in trade policies that deliberately screwed over ordinary Greek citizens by devaluing their work in an attempt to get more people to buy their products.
The People's Republic of China has been doing this for decades as well, even with a strong economy to back up its currency. They have deliberately undervalued their currency as a matter of national policy explicitly for the purpose of undercutting potential economic competitors and to pick up the currencies of other countries.
Hmm. You're quite correct...then is my (partial) explanation for the Euro situation in Greece wrong? If so, then by what means? I think that the "variation in cost of living" approach can only stretch so far, perhaps Ie, there's FAR more difference in the COL between New York and the outskirts of Bangalore than New York and Oklahoma. The COL approach works in the NY/OK case, but not with a cost of living variation as extreme as the first scenario. Then again...I'm not exactly sure.
I would say that the reason there is less of an extreme variation between people living in New York vs. Oklahoma is because of a stable currency that is common to the two areas rather than in spite of that. A common currency has forced state governments from engaging in trade policies that devalues the work of their citizens and encourages those governments to actually have a balanced budget and take care of their citizens. New York, compared to the rest of America, hasn't always been so strong in the past either and has had its ups and downs. I certainly remember when some serious talk was being made about what it would mean if New York City declared bankruptcy. Instead, that talk is now about California where that state government is having to deal with some significant fiscal issues.
Bangalore certainly has not had stable governments in the past nor access to a larger national economy like is found in America. Still, I would call most people in Bangalore at least better off in most respects than the "Oakies" were in the 1930's & 1940's that pushed a massive migration from Oklahoma to California. Living in America hasn't always been with streets paved of gold and as you currently see the economy.
BTW, the economy of California is larger than that of France and comparable to Germany, if you would deal with that state as an independent country. How California gets out of their current mess is certainly interesting as a spectator sport, but it is real hell for those living there if they are paying attention to the issues. Fiscally, they are almost as bad off as Greece and perhaps even worse. California also doesn't even have a remote option like being able to opt out of the U.S. Dollar and then trying to get out of their debts through a devaluation of their currency. All of California's debts will have to be paid off in U.S. Dollars.