SINCE the euro crisis erupted five years ago, the possibility of “Grexit” has been a recurring nightmare. It is looming again, as large as it did in 2012, when Greece was ultimately kept in the fold by a second big bail-out from the IMF and other euro-zone governments. Negotiations over the release of the remaining rescue funds have virtually broken down, as a new Greek government dominated by the radical-left Syriza party continues to balk at the reforms its creditors are demanding. The chances of a deal when euro-zone finance ministers met on June 18th (after The Economist had gone to press) looked slim. Yet Grexit looks no better an option now than it did three years ago.
The Greek population overwhelmingly wants to stay in the euro and the government led by Alexis Tsipras says it does too. This is understandable, since leaving the monetary union would be a bloody business rather than a surgical operation—or so the IMF predicted in 2012. The reintroduction of the drachma would entail the forcible conversion of all domestic assets and liabilities to the new currency, which would immediately plunge by 50% against the...
from The Economist: Finance and economics http://ift.tt/1FoH0MG
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