Monday, January 12, 2015

Greece and Europe must compromise to avoid Grexit

by Tony Barber

Financial Times

January 12, 2015

At its launch on 1 January 1999, the euro’s creators imagined entry into European monetary union as irreversible — a hotel from which, once a country checks in, it can never check out. But if Greece is to be a permanent resident, someone has to pay its bill.

Is the hotel management becoming restless? As Greece prepares for its January 25 election, some policy makers in Berlin and Brussels are dropping hints that the eurozone is better placed than in 2012 to survive a Greek exit, and might even be stronger without Greece.

Whether they believe this, or would convert beliefs into action, is another matter. Three years ago, at the height of the sovereign debt and bank sector emergencies, the German and Dutch governments looked hard at letting Greece go and decided not to. They feared setting a precedent with unpredictable financial and geopolitical consequences.

It would not have been a case of formally expelling Greece, for there is no legal mechanism to kick a country out of the eurozone. The European hoteliers would instead have asserted that the Greek guest, after losing his chips at the casino, had decided to leave town.


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