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‘If the euro fails…’:
AS THE government puts the final touches to its 11.5 billion euro spending cuts package, the question on the lips of many is whether this will be enough to silence an ever-growing chorus of foreign politicians and analysts foreseeing Greece’s eventual exit from the eurozone.

No matter what Greece does, the thinking goes, it will be too little, too late.

 Despite Greece’s lack of credibility, both German Chancellor Angela Merkel and French President Francois Hollande have insisted they want the country to remain in the eurozone, provided it fulfils its obligation to implement the reforms it agreed to in exchange for billions in bailouts.

Merkel also appealed to fellow German politicians to put an end to public speculation about Greece’s eurozone future. As long as “Grexit” scenarios persist, the likelihood of foreign investors pouring money into Greece will decrease.
 And without fresh investment, economic growth will not materialise in the short term, condemning the economy to an even deeper recession. Greece will remain a bottomless pit where more bailout money will be wasted, to the chagrin and frustration of its lenders, and the economy won’t recover whilst the country remains in the eurozone.

Despite growing confidence in some quarters that the damage from a Grexit could be contained, the risks of the euro unravelling still remain ominously high.

 Given the perceived hopelessness of the situation in Greece - and the economic woes of Spain and Italy - the European North must at long last decide what sort of eurozone it wants.
 If it wants to keep the single currency intact at all costs it will have no choice but to begrudgingly pick up the tab of the profligate countries of the South or else face continued uncertainty over the currency’s future. It will have to take an even bigger hit. It will also have to accept the idea - no matter how unjust - of debt mutualisation, which basically means to assume liability for the debts of other countries that have gone astray, so to speak. This, for example, could be done through eurobonds.

At the same time, the North must use all the leverage it has to force countries with runaway deficits to introduce strict fiscal rules and structural reforms.
 Merkel’s Germany has already pledged billions to save the single currency. If it turns its back now on its bankrupt partners, Merkel would have to explain a very expensive mistake.
 If Merkel’s statement this week that “if the euro fails, Europe will fail” is anything to go by, there is still hope that the single currency will survive. The billion-euro question is whether Greece can reform itself enough to remain in the same currency.