A Possible “Grexit”? Could this be the Beginning of the End for the Eurozone?

February 10, 2015

Nearly two years ago, I wrote an article for this website, entitled, “The Problem with the Euro – it’s a Cultural Thing,” In the article I discussed the cultural differences of the makeup of the eurozone and why I thought that this factor was a key player in the financial crisis gripping the eurozone project and concept.

I also argued the fact that in the headlong rush for economic harmony. I.e. that of a single currency – the euro and in which the very diverse, cultural differences, between its member states had been vastly underestimated, if not...overlooked entirely. It would now seem that what I had to say all those many months ago could be, at least, bear some merit.

Alan Greenspan, the Fed’s maestro for over twenty years, said this last weekend has now gone on record as saying, on the BBC’s radio broadcast, “The World This Weekend,” that, Greece will leave the Eurozone. I don't see that it helps Greece to be in the Euro, and I certainly don't see that it helps the rest of the Eurozone. It's just a matter of time before everyone recognizes that parting is the best strategy. The problem is that there is no way that I can conceive of the euro of continuing, unless and until all of the members of eurozone become politically integrated - actually even just fiscally integrated won't do it.

And, here is the key phrase he used, “Politically integrated,” which gets my attention – Greenspan cannot conceive the euro working in its current formant unless there in political integration, with the eurozone members. However, for that to happen, then there also needs to be cultural integration – I argue that the two go cap in hand. I.e. The cultural mentalities of the different countries involved, because just being “Fiscally integrated” Greenspan has said, “Won’t do it.”

The cultural divides between the northern and southern countries of Europe are especially acute.

Greenspan went on to say this in conclusion, “short of a political Union, I find it very difficult to foresee the Euro holding together in its current form. It probably could get a union of Germany, Austria, Luxembourg, the Netherlands, Finland for example. But not south Europe.”

With the anti-euro, as a result of the austerity measures being foisted on them + the anti-Merkel political parties now rising to the fore in peripheral European countries, Greenspan seems to have hit the nail right on the head.  

The fact of the matter is this...Mario Draghi, head of the ECB has said, “That if the Euro breaks down and if a country leaves the Euro, it’s not like a sliding door. It’s a very important thing. It’s a project within the European Union. That’s why you have a very hard time asking people like me, what would happen, if?” There is no plan B.” 

Today the threat of a Grexit, now seems so real the UK’s Prime Minister, David Cameron has discussed plans for a Greek exit, from the eurozone with the senior treasury and the Bank of England officials – discussing the financial risks to British businesses and interests; should the euro capsize.

The meeting came as leading figures have warned of heightened Grexit risks, including Alan Greenspan, the former chairman of the US Federal Reserve. It is “just a matter of time” before Greece drops out of the currency bloc, Mr. Greenspan said on Sunday. This could trigger a series of events that could bring about the eventual collapse of the single currency, he warned.

by Victor Romain

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