Photo: Sean Greenberg via flickr
The hottest question today in Europe is not “Will Greece leave the Euro?”, although that’s of course being talked about.The hottest question is: “If a new Greece government refuses to play along with the reform scheme, and then runs out of money, what can the rest of Europe do to boot it out?”
This is far more of an interesting question at the moment, since the left-wing SYRIZAT party is running on exactly the platform: Staying in the euro, but completely refusing to play by all the rules.
Krugman gets at this question in a post today:
“…the real moment of truth comes if and when the ECB — or more accurately the Bundesbank, which may ultimately be on the hook — decides to pull the plug.”
If the ECB decides to blow up the Greek banking system due to default or non-compliance or whatnot, that would probably be it for the Euro. Also if Greece started printing up its own currency to pay public sector workers, that might force the issue, as perhaps that would be a violation of the treaty. But the question is a big one: It’s not trivial to force a party out of a treaty even if they’re not paying their debts.