NP - The Greek Pain Fallout

[David Morris]

http://www.motherjones.com/kevin-drum

For Europe, the problem is different. If Greece leaves the euro, it
probably won't affect them very much. The Greek economy is simply too small
to matter, and most Greek debt is now held in public hands. However, the
political implication are potentially huge: it means the currency union is
not forever and ever, as promised. If the pain of using a currency whose
value is basically dictated by the needs of Germany becomes too severe,
countries will leave. Perhaps later they will be let back in. Instead of a
currency union, it will become more of a currency board, with countries
coming in and out as they need to. This will be especially true if
observers like Krugman are right, and the short-term pain of Greece leaving
is mild and long-term recovery is strong. That would send a strong lesson
to any future country stuck in the web of German monetary policy and
finding itself in a deep and long economic depression.
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