Stephen King: Now opened, the door to exit eurozone can no longer be shut

Economic Outlook: In truth, the existing eurozone rules are broken by the many, not the few

It's apt that the latest shenanigans involving Greece should have lifted the lid on the Pandora's box buried far beneath the euro's surface. According to Greek mythology, Pandora was the first woman on earth, created from clay by Hephaestus under orders from the mighty Zeus. Pandora was given a box (more accurately, a jar) that was never to be opened. Unfortunately, she couldn't resist. As she opened the box, all the evil within spread around the world. All that was left was hope.

Last week, the Pandora's Box was opened not by the Greeks – although Prime Minister George Papandreou's referendum threat certainly helped to identify its location – but, instead, by German Chancellor Angela Merkel and French President Nicolas Sarkozy ("Merkozy" for short). Thanks to their attempts to bully Greece into submission, we now know that Europe's leaders are prepared to accept the previously unthinkable – namely, that countries can exit the euro. Merkozy's box has been prised open. What evil awaits?

To be fair, Merkozy's bullying seems to have done the trick for the near-term. The referendum was cancelled, following German and French insistence that the vote would have to be on Greece's future relationship with the euro and the EU and not the latest bailout package, as Mr Papandreou had originally planned. That the Greek government relented suggests that leaving the euro (and, according to European law, the EU as well) was a journey down the River Styx too far.

While Merkozy's brinkmanship may have paid off, it has come at a considerable cost. Joining the euro was always supposed to be a one-way ticket. A country entered the single currency, the door behind was slammed shut and the key thrown away. The single currency was the ultimate political commitment.

Following last week's developments, we now know that this may no longer be the case. Misbehaving countries can choose to – or, more accurately, be encouraged to – leave. Athens' prevarication has led its eurozone partners to press the nuclear button. Greece now has a key to a door marked "exit". And if Greece can leave, who else might head in the same direction?

The answer, it seems, is those who can't stick by the rules. But whose rules? The eurozone crisis reveals that, in so many areas, there are no workable rules. Admittedly, it's difficult to offer Greece a great deal of sympathy, given its earlier fantasyland fiscal arithmetic and its citizens' competitive advantage in tax avoidance. The eurozone crisis has revealed, however, that, given the option, countries prefer to play a childish game of blame and counter-blame than to deal maturely with the systemic problems that may eventually drag even Germany into recession.

The views expressed are often contradictory. Germany, for example, wants to see price stability both in Germany and across the eurozone as a whole, but also insists that the solution to the problems facing Italy, Spain and other southern European nations rests with improvements to their relative competitiveness, through significant reductions in prices and wages (often referred to as the "Latvian option", following the Baltic state's hard-won success in this area). But if, say, average eurozone inflation rate is 1.9 per cent – in line with the European Central Bank's target – and southern European nations deliver inflation rates of around zero, consistent with Germany's demand that they should improve their competitiveness, it follows that Germany's own inflation rate will have to be well above 2 per cent to make all the numbers add up. That's how averages work. In the eurozone, however, this kind of straightforward logic too often plays second fiddle.

In truth, the existing eurozone rules are broken by the many, not the few, and the rules that need to deal with the increasingly fractured relationship between debtor and creditor countries simply don't exist.

Blaming Italy for having excessive government debt, for example, might seem like a neat ruse but excessive government debt didn't prevent Italy from joining the eurozone in the first place. And, if Italy has excessive government debt, so does virtually every other country in the eurozone. The Maastricht convergence criteria demand that government debt for countries within the eurozone should be no more than 60 per cent of national income or, if it is above that level, it should be coming down at a satisfactory pace. On that criterion, it's a bit rich for Germany (debt/GDP ratio in 2010 of 83.2 per cent, according to Eurostat) and France (82.3 per cent) to put all the blame on Italy (118.4 per cent) and Spain (61.0 per cent). They are all fiscal sinners.

And there has been a total failure to deal with the responsibilities of those in northern Europe who lent on such generous (possibly irresponsible) terms to those in the south. Put simply, Germany and its fellow creditors see themselves as the abstemious good guys, all the while regarding the debtors of southern Europe as no more than lazy reprobates who need to learn how to work harder. Yet if, as a nation, Germany chooses to save more (with its rising balance of payments current account surplus in recent years, this has clearly been the case), it must follow that other nations will have to borrow more. You can't have creditors without debtors. It's a bit like saying you've solved your alcohol addiction by forcing your neighbour to drink all your bottles of vodka: you may have solved your own problem but the challenge of alcoholism hasn't gone away.

In the absence of new rules, or any commitment towards some kind of fiscal union that embraces collective responsibility, it's difficult to see how the opening of Merkozy's box spells anything other than trouble. Now that countries can apparently leave, markets will surely start to price in the risk of departure. Already, Italian bond yields had risen to painfully high levels, owing to investors' – prescient – perception that all was not well. With Merkozy's box open, it's going to be a lot more difficult for Italy, on its own, to get yields back down, no matter how much fiscal austerity is delivered.

As the crisis has evolved, we appear to have ended up with playground politics, where only a couple of rules are necessary: (i) Don't mess with the biggest and strongest because, no matter how stupid they are, they will always beat you up; and (ii) Remember that, no matter how bad things are in the playground, you can eventually escape: children, after all, grow up.

What a shame that a once-grand vision has come to this. Up on Mount Olympus, the Greek gods must be totally dismayed.

News
peoplePerformer had recently been diagnosed with prostate cancer
News
The surrealist comedian at the Q Awards in 2010
people
News
The comedian, 42, made the controversial comment following the athlete’s sentencing to five years for the culpable homicide of Reeva Steenkamp on Tuesday
people
Life and Style
Could you tell the difference between this and an organic alternative?
food + drink

Culinary experts in The Netherlands thought it was 'fresh' and 'tasty'

PROMOTED VIDEO
Sport
Today's Liverpool Echo back page
football
Life and Style
Six of the 76 Goats' cheese samples contained a significant amount of sheep's cheese
food + drink
News
Russell Brand arriving for the book launch in East London
peopleRussell Brand cancels his book launch debate due to concerns about the make-up of the panel
Arts and Entertainment
JK Rowling will not be releasing a 'romance' novel anytime soon
books
Arts and Entertainment
Contestants during this summer's Celebrity Big Brother grand finale
tvBroadcaster attempts to change its image following sale to US
Life and Style
tech

Of all the computers Apple has ever made there’s only one that Steve Jobs had to sell his car to finance

News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Sarah Dales attempts to sell British Breeze in the luxury scent task
tvReview: 'Apprentice' candidates on the verge of tears as they were ejected from the boardroom
News
One of the 'princesses' in the video
videoYouTube reinstates sweary video after takedown for 'violating terms'
News
Call me Superman: one of many unusual names chosen by Chinese students
newsChinese state TV offers advice for citizens picking a Western moniker
Arts and Entertainment
film

Marvel has released first teaser trailer week early after it leaked online

Arts and Entertainment
Awesome foursome: Sam Smith shows off his awards
music22-year-old confirms he is 2014’s breakout British music success
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SQL Developer with T-SQL, Watford, Hertfordshire - £350 - £360

£350 - £360 per day: Ashdown Group: SQL Developer with T-SQL, Watford, Hertfor...

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: The SThree group is a world le...

Trainee Recruitment Consultant Birmingham

£18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...

Day In a Page

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker
Renée Zellweger's real crime has been to age in an industry that prizes women's youth over humanity

'Renée Zellweger's real crime was to age'

The actress's altered appearance raised eyebrows at Elle's Women in Hollywood awards on Monday
From Cinderella to The Jungle Book, Disney plans live-action remakes of animated classics

Disney plans live-action remakes of animated classics

From Cinderella to The Jungle Book, Patrick Grafton-Green wonders if they can ever recapture the old magic
Thousands of teenagers to visit battlefields of the First World War in new Government scheme

Pupils to visit First World War battlefields

A new Government scheme aims to bring the the horrors of the conflict to life over the next five years
The 10 best smartphone accessories

Make the most of your mobile: 10 best smartphone accessories

Try these add-ons for everything from secret charging to making sure you never lose your keys again
Mario Balotelli substituted at half-time against Real Madrid: Was this shirt swapping the real reason?

Liverpool v Real Madrid

Mario Balotelli substituted at half-time. Was shirt swapping the real reason?
West Indies tour of India: Hurricane set to sweep Windies into the shadows

Hurricane set to sweep Windies into the shadows

Decision to pull out of India tour leaves the WICB fighting for its existence with an off-field storm building
Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?