June 16, 2012
The departure of Greece from the euro has gone from impossible, to plausible and now almost inevitable - almost regardless of what happens in this weekend’s Greek election. Indeed, some well-placed figures are starting to whisper that Greece leaving the euro may be a good thing after all.
Long before the notion of "Grexit" became commonplace, some economists such as Nouriel Roubini argued that Greece's only chance of salvation would be to return to the drachma and devalue the national currency in order to regain competitiveness. Structural reforms and internal devaluation of the kind currently being attempted would take too long, and cause a social backlash. Departure from the euro would be less horrendous than staying in, Mr Roubini said on the margins of an Ambrosetti workshop in Cernobbio, on the shore of Italy’s Lake Como, last March. But it would be painful enough to discourage others from attempting it.
Intriguingly, some prominent voices in Brussels and elsewhere are starting to weigh other benefits of Grexit. This is not because they think it can be done painlessly. Even if first-order contagion through the banks can be contained with the various euro-zone rescue funds (and the European Central Bank), many think that breaking the integrity of the euro will immediately raise questions about the future of other countries in the single currency: Ireland, Portugal, Spain or Italy.
Yet it is precisely this fear of meltdown that the pro-Grexit voices regard as beneficial. Why so? Because the danger of implosion will force Germany finally to agree stand unambiguously behind the euro.