It has been Schaeuble, the German finance minister, who has been pointing out that the best solution to Greece's problems is a temporary exit from the euro. Get those problems sorted out and come back at some future date. This doesn't help with the idea that euro membership is irreversible and so on, but it is almost certainly the best of the ideas currently on the table for aiding Greece. I would go rather further: Greece shouldn't even attempt to come back into the euro but that's another matter. Leaving it with the blessing and aid of everyone else would be a better and easier solution than a unilateral declaration of exit. However, it seems that not everyone in Germany agrees with this idea:
Germany's vice chancellor is criticizing the country's finance minister for suggesting that Greece could take a five-year "timeout" from the shared euro currency to address its financial problems.
Sigmar Gabriel, who is also Germany's economy minister, said on ZDF television Sunday "it wasn't prudent to make this suggestion as a German suggestion," the dpa news agency reported.
It has to be said that's a pretty milquetoast criticism, even by the normally genteel standards of German politics. It's almost not criticising the idea at all, rather just muttering that perhaps we shouldn't say this outloud, along the lines of pas devant les enfants.
The thing being, as Alan Blinder points out, that the construction of the problem means that Greek continued membership of the euro means that there isn't really any way out:
How do you fix that? Under floating exchange rates, some semblance of parity would be restored by currency depreciation. But that can’t happen with a single currency. The answer could be either huge wage hikes in Germany or more devastating wage cuts in Greece—a terrible solution.
So the Greek problem may never be over as long as Greece remains in the eurozone.
Fortunately, as Wolfgang Munchau thinks, it's likely that Greece leaving is going to be the end point of this story:
This leads me to conclude that Grexit remains the most likely ultimate outcome after all.
There are three principal ways in which this can happen. The first is that a deal is simply not concluded. All that was agreed last week is for negotiations to start, plus some interim financing. A deal might fail because principal participants themselves are sceptical. Wolfgang Schäuble, the German finance minister, says he will keep up his offer of a Grexit in his drawer, just in case the negotiations fail. Mr Tsipras denounced the agreement on several occasions last week. And the International Monetary Fund is telling us that the numbers do not add up, and that it will not sign unless the European creditors agree to debt relief.
We should note that Schaeuble isn't recommending Grexit for any of these adjustment reasons. Rather, he's defending the German red line that the euro must not become a transfer union. For everyone knows that if it does then it's going to be German money being transferred south. And while that's the inevitable logic of the fiscal union that is required to make the euro even half-work, that's not something the German citizenry are willing to put up with. So, Schaeuble keeps saying that a country in the euro cannot default: for that would be a transfer of resources from one euro country to another. And we can't have that so we cannot have a default. It may be only defending that red line but it's also an elegant argument in favour of that negotiated exit: for then, only at that point can Germany grant Greece a haircut on the debt burden.
My own beliefs are rather stronger than those of these distinguished gentlemen. The euro was a bad idea for everyone in the first place, it became a worse one for everyone and Greece when Greece was allowed to join and the solution is for Greece to leave as soon as they can print up the new bank notes. And being the extremist that I am, everyone else should follow immediately afterwards and we can bury the corpse of the mistake with a stake through its heart.
And for anyone who doesn't think it is a mistake, Greece's GDP has fallen by 30% in the past few years. That's almost unprecedented in a peacetime economy and it's all been brought on by that single currency. Sure looks like a mistake as an economic arrangement to me.
