For the first time, the subject of a country leaving Eurozone has been raised at Heads of Government level in the European Union. It has been made clear to the Greeks that a rejection by referendum or in a general election of the measures imposed by the EU would mean this is the very likely outcome.
There is a problem, however.
There is no actual mechanism for a country to leave the Euro. It cannot simply opt out. When the rules were designed any mechanism to leave was deliberately left out, as it was intended that people joining the Euro were clear that this was a one-way street, and leaving at any time would not be an easy option.
Aside from expulsion, the only way for a country to decide to leave the Euro is to leave the EU entirely. This is why there is talk in the news about this Euro financial crisis heralding the breakup of the whole European Union.
For a country like Greece to leave the EU is reasonably straightforward, although pretty painful. It simply has to serve notice and negotiate and agree the terms of the exit. Financially, there would be much grief for Greece, but as with other countries who have suddenly inherited a hugely devalued currency, this would settle out. Parallels are drawn with Argentina ten years ago, or Malaysia after the Far East financial crisis a decade before that. With strong leadership and a reinforced national pride, could Greece join Switzerland, Iceland, Liechtenstein and Norway as successful European countries outside the EU?
The really worrying thing, which is in everyone’s mind, is whether countries who are in severe austerity without growth largely because their currencies are linked to the Euro, such as Portugal and Ireland, might opt to join Greece outside the EU.
Or what about Spain?
If these countries were to cut themselves loose from having their currencies pegged to the Euro, and devalued, there would without doubt be a period of rampant inflation and an inability to buy much from overseas. However, properly managed, there may well be strong growth generated, which is what everyone is crying out for at this stage. A weak currency is exactly what an exporting country needs.
So, short term massive cost, longer term growth and health – would it not be worth it?
Obviously things are not quite as simple, but………… people are thinking about it.