http://krugman.blogs.nytimes.com/2012/05/13/eurodammerung-2/

Some of us have been talking it over, and here’s what we think the end game looks like:

1. Greek euro exit, very possibly next month.

2. Huge withdrawals from Spanish and Italian banks, as depositors try to move their money to Germany.

3a. Maybe, just possibly, de facto controls, with banks forbidden to transfer deposits out of country and limits on cash withdrawals.

3b. Alternatively, or maybe in tandem, huge draws on ECB credit to keep the banks from collapsing.

4a. Germany has a choice. Accept huge indirect public claims on Italy and Spain, plus a drastic revision of strategy — basically, to give Spain in particular any hope you need both guarantees on its debt to hold borrowing costs down and a higher eurozone inflation target to make relative price adjustment possible; or:

4b. End of the euro.

And we’re talking about months, not years, for this to play out.

I see little reason why the euro zone would fall at all. The markets have already been sold on a greece euro exit.

Note: Krugman was always a dramaqueen. That's his narrative.

Why does everyone keep saying that? Noone can force us out of the Euro, we can very well default within the Euro.

Because it would be much easier for Greece to apply stimulus with a currency better-suited to their own needs. No-one can force them out, but what can happen is a mutual acknowledgment of of the benefits of going their separate ways.

That said, if Greece tanks the Euro, then you'll have the loose money you need to regenerate employment.

I was reffering to the notion that the EU will kick us out of the Euro if we don't accept the bailout terms, which is plain bluff, and a way to shape the upcoming elections to their liking (the EU officials). Of course, the Drachma was a way better currency for Greece, but it would be almost suicidal to go back right now.

Yes, our exports and tourism would flourish, but our debt would become even more daunting, unpayble, thus we'd have to default. And with the devalued Drachma, we couldn't import gas, petrol, medicine,etc...

I hope he is right but I am sure he is wrong. The politicians are ready to drain all of tax payers money to keep their dream alive of a United States of Europe.

I don't think it'll happen in June.

Even if the socialist/communist guy wins it'll take time.

Kicking it out would take time.


Outside that it's very possible, though unlike Krugman i don't hold the sunshine and puppydogs outlook that it will solve greece's problems right away and be better off then the current austerity.

What someone noted is that an announcement of Greece's withdrawal from the Euro would do quite a bit of damage to the currency, as it would prompt a run on the banks for Greeks to get as many stable Euros as they could before flopping off into the comparative unknown that would be the new drachma, straining overstretched banks in other Eurozone countries.

The Euro won't fail.

It is funny.  For all the talk in the US about the banks needing more regulations and stricter holding requirements and the like....

Europe is about a dozen times less that.