It is time to let Greece go. I do not propose stamping on the fingers of the Athens government as it clings to the edge of the euro cliff. But we have reached the point where hoping for the best invites calamity. Europe needs a plan to manage Greece’s fall.
The eurozone has two sets of problems. The first revolves round the insolvency of Greece, the fragility of Portugal, Spain and Italy, and the accompanying strains on Europe’s banks. The second is the dire fiscal and competitive weakness of economies beyond the core. Dealing with the first will not of itself settle the second. But it is a necessary start.
The pressing decision is about the timing and terms of Greek default. It is possible that the politicians still have a choice between orderly restructuring and a chaotic collapse that quickly engulfs everyone else. Possible, but not certain. The more governments argue about how to build firewalls around the other peripheral economies and about how to insulate the banking system, the more likely the flames will spread uncontrolled across the continent.