Defense, Offense, and the Euro Zone War

Nearly two years ago, I predicted that the main targets of the euro zone crisis would be big countries, not small ones. That has since turned out to be the case. But what does it mean for Greece? And what does it mean for the EU in an economic policy sense?

Briefly, the most important issue at stake is whether Greece will go bankrupt, and/or leave the euro zone. That is not a sure thing, but looking increasingly likely. There are limits on EU funds, and ECB purchases of Greek debt will come with intrusive audits and demands by the IMF. There will be no free lunch within the confines of the euro zone. It may prove unbearable for the Greeks to stay, or brush their pride the wrong way. The alternative of a short, sharp Argentinian crisis may be the alternative.

This means that unless the EU takes the offensive and builds a financial mechanism capable of fighting for large countries and small ones, that it must put a great deal of effort into defensive mechanisms that will help its members (both countries and banks) survive a Greek collapse, and then a Portuguese one, at the very least. Good boxers don't just learn how to hit. They learn to take punches as well.