German politicians seem to have lost patiencewith Athens. Blustering about throwing good money after bad, theyhave shown a new eagerness to throw Greece out of the currencyunion, at least rhetorically. They are not alone. Similarsentiments have surfaced in Austria, Finland, the Netherlands andeven Estonia. Understandable as such talk is, an expulsion ofGreece is not as easy as these naysayers seem to believe and wouldalmost surely cost the eurozone more than further accommodation, alot more. On the assumption that politics will follow at leastvague cost-benefit calculations, the likelihood then is thatEurope, for all the tough talk, will find a way to keep Greece inthe currency union.

The rhetoric certainly has intensified. Though German ChancellorAngela Merkel has remained circumspect, her own economy minister,Philip Rösler, stated bluntly that “a Greek exit has long sincelost its horrors.” In only slightly less blunt language, herfinance minister, Wolfgang Schäuble, said: “It is not responsibleto throw money into a bottomless pit.” Volker Kauder, who heads theconservatives in Merkel's own party, the Christian DemocraticUnion, declared that Greece has run out of “wiggle room” and thereis “little chance of a third aid package.” Stefan Müller,parliamentary secretary of a coalition partner, the BavarianChristian Social Union, believes any concession would send “thewrong message entirely.” Bavarian finance minister Markus Söderopenly called for expelling Greece from the currency union, whileAustria's finance minister sought ways to add language on expulsionto the union's governing documents.

If the problem were just Greece, Europe would have littledifficulty acting on such tough talk. Merkel, no doubt, would joinin, and Europe would have banished Greece from the euro months ago.The Greek economy, after all, is less than 2% of Europe's grossdomestic product, and its outstanding government debt amounts toless than 1% of all European bank assets. The problem is thatGreece's fate casts a shadow over all the countries in Europe'sbeleaguered periphery, including the significant economies of Spainand Italy. Even while Greece remains in the union, the continentfaces a profound risk that a contagion of fear that could bringdown the finances of Portugal, Spain, Italy and others. Theexpulsion of Greece significantly raises the probability of such apanic.

It is easy to understand the fear investors and bankers haveabout countries exiting the eurozone. They anticipate forciblecurrency conversions from euros into newly revived nationalcurrencies that would surely depreciate and cut deeply into thereal value of their assets. They also expect expelled governmentsto repudiate their euro debts and counterparties in the troubledeconomies to have difficulties meeting their obligations. Suchprospects would prompt bankers and investors, on the least hint ofexpulsion, to remove their deposits and assets to safer locations.The whole pattern, by decreasing financial liquidity and driving upinterest rates for all borrowers in such questionable countries,would compound their financial difficulties, deepen their economictroubles, and, in a pattern of self-fulfilling prophesy so familiarin finance, significantly raise the probability that they will infact have to depart the currency union.

Just the talk of a Greek departure hasengendered signs of such strains. To be sure, Spanish bonds havesold well recently, pushing their yields down enough to offerMadrid some relief. But that improvement hinges entirely onEuropean Central Bank President Mario Draghi's promise to buy largevolumes of Spanish debt if necessary. Otherwise, concerns for thefuture of the euro have driven funds away from Europe's troubledperiphery into Germany and other stronger economies, so thoroughly,in fact, that German interest rates have at times dropped intonegative territory. The fears have reduced cross-border interbanktransactions so that in June, the most recent month for which dataare available, they ran at their lowest level since the 2008-2009financial crisis. Several European banks have loosened their tiesto their own subsidiaries in periphery countries. Germany'sCommerzbank and Deutsche Bank have ordered their Spanish andItalian branches to borrow from the ECB rather than rely on fundsfrom headquarters. European oil giant Shell has stated bluntly thatit hesitates to invest funds in Europe in any way.

Should such fears spread, as they almost certainly would after aGreek expulsion, Europe could expect to face economic and financialpains comparable to those suffered in the United States during thesubprime crisis. Though fear of currency depreciation was not afactor in the American experience, default was, along with concernsabout whether counterparties could meet their obligations. Thereluctance of financial institutions to advance credit in such anuncertain environment, even to each other, caused interbank lendingrates to soar, despite the Federal Reserve's commitment to keep itsbenchmark federal funds rate near zero. The ensuing loss ofliquidity widened credit spreads and forced asset prices to fallfaster and farther than they otherwise would have, deepening andprolonging the recession and significantly slowing the pace of thesubsequent recovery.

If Europe, which is already in recession, wants to avoid such afate, then one way or another it must convince investors andbankers that the euro is not in jeopardy. Finding a way to keepGreece in the currency union is the easiest way to do that, which,no doubt, is why all have worked so hard to support Greece duringthese last two-plus years of crisis and why expulsion, for all thetough talk, is less likely than accommodation and compromise. To besure, Berlin will try to get the best deal it can. It will continueto insist on safeguards and to demand that Athens correct itsbudget problems at the same time it retools its economy. Athens maychoose to go its own way. Politics, never wholly rational, may yetforce the eurozone into draconian, if self-destructive, action. Butif the politicians pause for even the most cursory review of costsand benefits, an expulsion of Greece looks a lot less likely thancompromise.

For more articles by Milton Ezrati about Europe's debtcrisis, see Berlin's Limited Options and Where Is Blücher? For recent news coverage,see Merkel, Monti Lead Diplomatic Push and Weidmann Resignation Report Fuels Tension.