By Teresa Welsh |
However, tempting it may be to revoke Greek membership in the euro club, it will only benefit the rest of us if they leave right now. That is not realistic.
The eurozone is equivalent to a Catholic marriage (no divorce or a very messy and costly one) and an attempted Greek exit now will do more damage to global financial markets. On June 17 the Greeks will try to form a new government again. The end result most assuredly will be reneging on previous bailout promises and slowing down of austerity programs. This will almost certainly cause another financial market drama which will crescendo when the European Union (Germany and France) and International Monetary Fund have to decide whether or not to give the new Greek government the next portion of the bailout money in mid-summer. If the bailout money is given to the Greeks, this will simply buy the rest of the world more time until the next calamity. If there is no EU/International Monetary Fund bailout money, the Greeks are bust within two months but this time there is no one to bail them out. This will bring chaos, anxiety, and uncertainty as it will scare the markets; and southern Europe will be under pressure again. This anxiety will unquestionably spread to Italy. Despite the two "Mario brothers" (Italy's Monti and European Central Bank's Draghi), Italy is too big to save. If Italy's current liquidity problem turns into a real solvency problem, then the sky really is falling and it will impact us here in America. Thus the EU and IMF will be under pressure to give the next portion of bailout money to the Greeks this summer.
For the Greeks, being out of the eurozone would mean being locked out of the global private capital markets or paying such a high price to borrow that economic growth will be a distant memory. Any new money the Greeks create (new drachma) will lose 50 percent of its value the day it is printed. Thus the only salvation for the Greeks is to stay in the eurozone no matter how painful. The only sane answer to this mess is to not to try to kick the Greeks out now but rather kick the "can down the road" until such time that the possibility and messiness of a Greek exit causes less ripples in the markets. So for now, the answer is no.
About Scheherazade Rehman Professor at George Washington University
Kent Hughes Director of the Program on America and the Global Economy at the Woodrow Wilson Center
Michael Arghyrou Senior Lecturer at Cardiff Business School
Sabina Dewan Director of Globalization and International Employment at the Center for American Progress