Bloomberg
May 16, 2012
The chaos in Greece has resumed and a new election that nobody expects to resolve anything looms. Exasperated European Union officials have begun openly discussing the country’s exit from the euro currency system. This is a grave mistake. Greece’s exit would be no less catastrophic than when the EU called it unthinkable -- and not just for Greece.
“Divorce is never smooth,” Luc Coene, the governor of Belgium’s central bank and a member of the European Central Bank’s governing council, told the Financial Times on May 13. “I guess an amicable divorce -- if that was ever needed -- would be possible but I would still regret it.”
Amicable? That’s one thing Greece’s exit from the euro couldn’t be. As the economist Barry Eichengreen, the leading authority on these matters, has argued, it would provoke “the mother of all financial crises.” The contemplation of this possibility by EU leaders is making matters even worse. Greece has no chance of recovery while this danger hangs over its economy.
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