Coming out of Greece in the euro area will cause severe damage to the country and throughout Europe. And probably will be one of the best things that ever happened to the currency union.
Repetition of parliamentary elections next month will serve as a referendum on whether the country wants to end 12 years of membership in the club of the common currency.
The answer will cause cardiac arrest of the Greek economy as the banking system will collapse and foreign suppliers will refuse payments drachmas. The financial system of the euro area, the largest international lender of Greece will pay hundreds of billions of euros in losses.
For the European economy as a whole, the main danger would come from increased foreign exchange risk, then change the status of monetary Union, which by definition had to be indestructible.
When the Greek banks collapse or be closed to facilitate the conversion of deposits into their new drachmas, nobody can predict whether individuals and companies will not withdraw their money from the periphery of Europe, just in case. The result can be financially disastrous.
Potentially dire consequences led many to suggest that no responsible European politician will not allow exit of Greece from the euro zone. Thus, speculation that Greece would suffer the consequences of failure to follow policies of economy and reform, sound like empty threats.
This logic, however, underestimate a crucial element of the political economy of the euro area: The Union of sovereign states in part without supranational body, there are still concerns about moral hazard – the opportunity to condescension Greece to encourage other countries to misbehave, there are a huge burden .
European leaders were not bluffing when threatening to stop the financial tap for the Greeks. They are ready to leave the Greek government to decide and leave the country like Montenegro uses the euro without being a member of the euro area or return to the drachma.
What European leaders would not allow a collapse of monetary union. To protect other member states will have to move very quickly to economic and financial integration, which has always been necessary for long-term survival of the euro.
Such is the nature of the European Union and the history of regional integration: It is driven by episodes of acute crisis.
For example, consider how Europe can meet the threat of bank runs. Only a common mechanism of Deposit will convince people and businesses to keep their deposits in risky countries like Portugal, Spain and Italy. Such a mechanism would require a quantum leap in the integration of banking supervision in the euro area. And that placing control of supranational banks may be a direct result of leaving the euro area of Greece.
Catastrophic economic consequences will be consolidating effect on the currency union. The example of the Balkan country will make other countries in the so-called periphery of the euro area to be very careful and take it easier integration processes.
Thus the release of euro area will relieve Greece one of the biggest problems and it will reduce the difference in competitiveness between individual European economies.
Ultimately, only deeper integration among the other euro area countries can re-establish the notion that monetary union is indestructible and unique.