By Juan Pedro Marín Arrese, in Madrid | Europe seems to witness with sheer indifference the Greek slide into utter ruin. Not so long ago Ms Merkel used to stress her unshakeable resolve not to let down any euro country. But the German finance Minister is currently pushing the Hellenic government towards the exit door. What has happened for such a U-turn? To begin with, fears about financial system contagion have been largely dispelled. Once banks are ready to lose 70% of their total exposure, there is little ammunition left to hurt them. On top of that, massive liquidity injected by ECB is proving to be a formidable shield to pave off any potential turbulence. People are also tempted to believe that such a tiny share of Europe GDP can be stamped out without inflicting much damage to others health.
Can a member of the club be left stranded facing alone its bleak fate? If so, nothing may prevent others from following the same road. And sooner or later, doubts would be cast on the most vulnerable countries like Portugal. You might say that money can solve any problem. True enough. But as Talleyrand pointed out to Napoleon, you can do almost everything with bayonets save seating upon them. Should markets begin to waver, no rescue fund for all its size could plug the drain on the reserves.
Even if Europeans leaders are growing weary on Greece’s appalling lack of delivery, forcing its exit from the euro, let alone its disorderly default, might run havoc on overall stability. There are reasons to believe it will not be able to meet its commitments in future. But it seems preferable to foot the bill and avoid the worst from happening. Just think what might happen should Italy come under attack. There simply wouldn’t be enough bullion to save that country and the euro with it. Even if Greek barbicans appear to be quite dented, failure to defend them now might open the way for a successive fall of seemingly strongholds. Too risky to take a bet on it!
* Juan Pedro Marín Arrese is an economist.
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