I just heard a potential sign of the impending Greek exit from the Euro: this is the first time I can remember in 25 years of listening to NPR that they have included information in the news update about the day’s trading on the stock markets in France, Germany, and other European countries.
I’ve also learned in my morning reading that some are using the less-than-felicitous term “Grexit” as shorthand for the impending Greek exit from the Euro. Ugh.
Of course Greeks (and others, including British PM David Cameron) are making strong arguments about the large economic and social costs of Greece leaving the Euro. What are the costs of enabling them to stay? That’s the material question. If we have a flexible and adaptable and resilient global economy, we can digest the contagion. But some places are more brittle than others, due to rigidities such as labor market regulations (hello Spain!). I think contagion will be largest where those rigidities are highest, which means Europe. But are European countries willing to accept the costs of years of stagnation and debt load to avoid the disruption that will likely be sharp but briefer if Greece exits?