The Consequences of Greece

It seems that the more important casualties of the Greek situation will be the still remarkably opaque transfer mechanisms that are needed in order to keep any monetary union together.   It should be remembered that even ‘successful’ monetary Unions – such as that between Wales and England rely on significant and persistent transfers from the strong to the weaker economies but Europe’s long-suffering (and many cases aging) populations are now likely to become even less likely to write yet more open-ended cheques in order to keep the weaker economies on-board an experiment that may anyway be losing its geo-political relevance as memories of its post WWII genesis fade. Consequently, the responsibility of holding the Euro together will once again likely fall solely on the central bank’s shoulders and the only tool available to it (if its TARGET2 activities do indeed become constrained) will likely be the currency.