Grexit is politics, not economics. One motivation for the euro was assuring a stable and peaceful Europe where countries would trust one-another, where Germany’s faster growth and stronger economy would not splinter the continent or worse. A purely economic design for a euro would have included unified fiscal and banking systems and would not have looked the other way when countries failed to meet their fiscal policy commitments for entry. Leaving the euro would be extremely messy, for Greece or any member country. On day one after the euro the exiting nation would have no currency, no payments system and probably no credit.
Default and an exit from the euro are not absolutely linked. Given the calendar and debts, a default would come before Grexit if both occur. A default probably increases the probability of Grexit, but definitely doesn’t guarantee it. Neither default nor Grexit are inevitable. Greece has surprised before and avoided the inevitable. Grexit would be mired in politics and politics is even less forecastable than economics.
While most of the media and the blog sphere focuses on when default will happen, there is the Greek position explained by Yanis Varoufakis, the finance minister.
This article was written by David Blitzer, chairman of the index committee, S&P Dow Jones Indices.
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