May 19, 2012
“Grexit” is an ugly term for what may soon become an even uglier reality: Greece’s departure from the euro zone. As fury in Athens runs up against frustration with Greek recalcitrance in the rest of the European Union, the EU’s most troubled economy could be heading out of the single currency within weeks. If Greek banks suffer a mass run, as depositors withdraw euros for fear they will be forcibly converted into new drachmas, Greece’s fate could be settled even sooner.
Greece’s ascendant politicians, particularly Alexis Tsipras, leader of the radical left Syriza party, want to repudiate Greece’s rescue deal with its European and IMF creditors. The creditors, particularly Germany, are standing firm, rightly making clear that they will not be blackmailed into repeatedly rewriting bail-outs. If in fresh elections on June 17th the objectors have a majority, as the polls suggest, and if they renege on Greece’s bail-out deal, then the world will cut off the supply of rescue funds. It is hard to see Greece then staying in the euro.
There is already a whiff of inevitability about an outcome once deemed impossible. Central bankers now openly discuss the possibility that Greece may leave. As the impossible lapses into the inevitable, a growing chorus is arguing that it is even desirable. Advocates of an exit say that Greece would gain from a cheaper currency, and that the politics of forging a closer fiscal and financial union between the euro zone’s remaining members would be easier without a country that should never have joined in the first place. But it is wrong to pretend that a Greek exit is an easy or desirable outcome. Before it is too late, Greek politicians need to be honest about what an exit implies. And Europe’s politicians need to act far more boldly to protect the rest of the euro zone in case the worst happens.
More
No comments:
Post a Comment