The situation is becoming intolerable. The authorities are trying to buy time, but time is running out. The crisis israpidlyreachingaclimax.
Germany and the other eurozone members with AAA ratings will have to decide whether they are willing to risk their own credit to permit Spain and Italy to refinance their bonds at reasonable interest rates. Alternatively, Spain and Italy will be driven inexorably into bailout programs. In short, Germany and the other countries with AAA bond ratings must agreetoaeurobondregimeofonekindoranother.Otherwise,theeurowillbreakdown.
It should be recognized that a disorderly default or exit from the eurozone, even by a small country like Greece, would precipitate a banking crisis comparable to the one that caused the Great Depression. It is no longer a question whether it is worthwhile to have a common currency. The euro exists, and its collapse would cause incalculable losses to the banking system. So the choice that Germany faces ismoreapparentthanreal—anditisachoicewhosecostwillrisethelongerGermanydelaysmakingit.
The euro crisis had its origin in German Chancellor Angela Merkel’s decision, taken in the aftermath of Lehman Brothers’ default in September 2008, that the guarantee against further defaults should come not from the European Union, but from each country separately. And it was German procrastination that aggravated the Greek crisis andcausedthecontagionthatturneditintoanexistentialcrisisforEurope.