Breaking up is hard to do

June 14, 2012

From our colleagues Cooley, Richardson, and Schoenholtz:

Policymakers in the eurozone underestimate how difficult it will be to hold the remaining euro area together if Greece exits.  …  The reason is that the euro area was designed to be irreversible, [there is] no provision for exit.   A Greek exit would be a logistical nightmare.  [But it would make] the commitment of other members not to exit vastly more difficult to make credible, [and therefore] subject to doubts and speculative attacks.

More here.


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