Milton EzratiGerman politicians seem to have lost patience with Athens. Blustering about throwing good money after bad, they have shown a new eagerness to throw Greece out of the currency union, at least rhetorically. They are not alone. Similar sentiments have surfaced in Austria, Finland, the Netherlands and even Estonia. Understandable as such talk is, an expulsion of Greece is not as easy as these naysayers seem to believe and would almost surely cost the eurozone more than further accommodation, a lot more. On the assumption that politics will follow at least vague cost-benefit calculations, the likelihood then is that Europe, for all the tough talk, will find a way to keep Greece in the currency union.

The rhetoric certainly has intensified. Though German Chancellor Angela Merkel has remained circumspect, her own economy minister, Philip Rösler, stated bluntly that “a Greek exit has long since lost its horrors.” In only slightly less blunt language, her finance minister, Wolfgang Schäuble, said: “It is not responsible to throw money into a bottomless pit.” Volker Kauder, who heads the conservatives in Merkel’s own party, the Christian Democratic Union, declared that Greece has run out of “wiggle room” and there is “little chance of a third aid package.” Stefan Müller, parliamentary secretary of a coalition partner, the Bavarian Christian Social Union, believes any concession would send “the wrong message entirely.” Bavarian finance minister Markus Söder openly called for expelling Greece from the currency union, while Austria’s finance minister sought ways to add language on expulsion to the union’s governing documents.

If the problem were just Greece, Europe would have little difficulty acting on such tough talk. Merkel, no doubt, would join in, and Europe would have banished Greece from the euro months ago. The Greek economy, after all, is less than 2% of Europe’s gross domestic product, and its outstanding government debt amounts to less than 1% of all European bank assets. The problem is that Greece’s fate casts a shadow over all the countries in Europe’s beleaguered periphery, including the significant economies of Spain and Italy. Even while Greece remains in the union, the continent faces a profound risk that a contagion of fear that could bring down the finances of Portugal, Spain, Italy and others. The expulsion of Greece significantly raises the probability of such a panic.

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