Guardian
May 23, 2012
When the G8 major economies convened at Camp David last weekend, the continuing crisis of the euro, common currency of 17 European Union (EU) members, dominated the economic discussions. The agonies of Greece, badly divided in recent parliamentary elections, and forced to vote again on 17 June, were at the forefront.
Growing popular support for Greek extremist parties, right and left, deeply concerns other EU members, especially if the hard-left Syriza party, now leading, prevails in the upcoming round. Syriza unequivocally rejects the tough fiscal measures the EU required, at German insistence, to bail Greece out from decades of profligate fiscal policy, and a Syriza-led government would cross all of Germany's declared red lines.
Thus, the once-unthinkable prospect of Greece exiting the euro and returning to a national currency is now undergoing frantic contingency planning in Athens and Brussels. Several EU leaders believe that disciplining Greece by expelling it from the eurozone will chasten other troubled EU economies, with overall EU stability quickly following Greece's departure. Iceland, for example, shows that devaluation can be precisely the medicine necessary for a major economic correction. Although painful short-term, Greece leaving the euro may prove more palatable than years of social turmoil by Greeks unwilling to abandon pursuit of a free lunch.
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