Reversible? Move along, nothing to see here.

Coeure’s comments that a Greek exit from the eurozone can ‘no longer be excluded’ is exciting much comment, and shock that it contrasts with previous declarations that euro membership was irreversible.

I don’t know why anyone took the irreversibility so seriously.

In an ideal world,  institutions would persist only so long as the costs of change exceed the benefits.  In democracies, their endurance is related to the length of time a consensus prevails that the alternatives would be worse.  Sometimes institutions cling on anyway.  Sometimes those that should endure don’t.

Why could it ever have been credible to suggest that there was no possible contingency when the costs of Greece, or some other country leaving could never be less than the benefits, for all those concerned?  The costs and benefit calculus can change.  Or perceptions of them.  Or they could change for particular groups that have a decisive interest and agency.

And again another idea circulates that without that irreversibility, the euro is no more.  To repeat a point I’ve made a few times, there is no reason it has to be so.

The eurozone may be taken to be a set of rules about how to do monetary, financial stability and fiscal policy.  The expectation that those rules will govern the policies of surviving members may in fact become more entrenched by separation from a former member that either could or would not abide by them.  In fact, far from this being a hypothetical, as I have just put it, it’s quite likely to be part of the motivation for why the creditors behave as they do.

 

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2 Responses to Reversible? Move along, nothing to see here.

  1. Doly says:

    Logically speaking, it’s always been obvious that euro membership couldn’t be irreversible. But the fact that such claims have been made shows that there is a desire for that perception. And the only rational reason for that desire is a fear that once everybody starts calculating costs and benefits coldly, many countries would leave. Therefore, the logical conclusion is that once the euro proves not to be irreversible, the euro membership would decrease substantially.

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