I agree with Vox’s Dylan Matthews:
If European lenders really cared about the European project, they’d be trying to persuade their countrymen to move closer to European super-statehood, big transfer to Greece and all, rather than punishing Greece. And the more spending and tax policy Europe takes on as a whole, the less it has to rely on the Greek government’s poor tax collectors and corrupt bureaucrats. The reforms the lenders want so desperately would come naturally. They just need to lend Greece a hand.
As Matthews points out, this would make European nations a lot more like American states, and here in the US the economically successful states subsidize poor performing states as a matter of routine, and hardly anyone ever bats an eye. Of course, this is also why it can’t happen; all those well-established European national governments are never going to agree to give their power up to a new United States of Europe. And given that it’s never going to happen, the best thing for the long-run benefit of poorer Eurozone countries like Greece, Portugal, Spain, etc. is for them to get out of the Eurozone.
As it’s set up now, the Euro forces countries like Greece to hand their control over monetary policy to the European Central Bank, which is heavily influenced by German bankers and is likely to do whatever is in Germany’s economic interests, even when that diverges from what’s in Greece’s interests (as it does now). But at the same time, there’s been no corresponding commingling of European fiscal policy, the mechanism by which countries like the US balance out the effects of monetary policy (a strong dollar, for example, affects different parts of the US economy differently). This is the rare occasion on which you’ll see an inveterate lefty like me agreeing wholeheartedly with Milton Friedman, who saw all this coming back in the 1990s.
The Eurozone can’t exist indefinitely like this. Even if a Greek exit doesn’t happen now, it’s hard to see how Greece can remain an austerity-ravaged economic hinterland in perpetuity, which is what appears to be happening now. And if Greece eventually does leave the Euro, the short-term pain that entails is likely to be followed by long-term growth and benefit, which may make leaving the Euro look a lot more attractive to the other countries that have lost, rather than gained, from joining the currency union. I realize that the Eurozone’s rationale goes way beyond economics, but ensuring European stability doesn’t depend on a common currency, and at any rate whatever stability the common currency offers is on the verge of being overwhelmed by the instability that derives from instituting a currency union without any political union.