Thursday, May 17, 2012

No Exit to Athens

Said the Austrian Minister Fekter,
Alarmed at a Greek exit specter:
"For leaving the 'zone,
The course is unknown"
(A point on which few would correct 'er).

"For Greece, any expert you dial up
On making a roadmap worthwhile up,
Most likely expects it
Is less like an exit
And more like a 20-car pile-up."

"If I go there will be trouble; if I stay it will be double."

So sang The Clash 30 years ago, in a eerie presentiment of the dilemma facing eurozone policymakers today. Should Greece stay in the euro, as Angela Merkel now advocates in a newly full-throated campaign? This would underpin European unity and lessen the contagion risk for Spain and Italy. It would also shackle the Greek economy to an overly strong currency and obligate the "core" countries to provide an indefinite flow of subsidies, as Hans-Werner Sinn, chief economist of Germany's IFO Institute, recently complained. And yet, the exit from the euro is not only uncertain and fraught with risk, it isn't even legal.

Thus, Austrian Finance Minister Maria Fekter told inquiring reporters flat out: "It isn't possible to leave the eurozone." Though such legal hurdles might be surmounted, experts who have studied the situation voice concerns about uncontrollable bank runs in Greece, as savers there fear the replacement of their euro nest eggs with cheaper New Drachmas. Indeed, such fears provoked the withdrawal of €700 million from Greek banks on Monday. It seems that the one thing that cannot be tolerated in the eurozone is more uncertainty.

"So you've just got to let me know, should I stay or should I go?"

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