Why Didn't Greek and European Leaders Think About the Inevitable Greek Exit From the Euro Until Three Weeks Ago?


A time for choosing

There are plenty of horribles contemplated in this Bloomberg piece from yesterday on war-gaming the Greek exit from the Euro, but the subtheme that jumps out at me is how basically no one even contemplated the step-by-step practicalities of this inevitability until about three weeks ago:

The specter of Greece leaving the euro was evoked when ECB executive board member Joerg Asmussen told Germany's Handelsblatt in an interview published May 8 that Greece couldn't renegotiate its bailout terms if it wanted to stay in the euro. […]

The remarks followed elections May 6 that propelled the Syriza party, which calls for reneging on the bailout accords, into second place. […]

"Although such a scenario is unlikely to materialize and it is not desirable either for Greece or for other countries, it cannot be excluded that preparations are being made to contain the potential consequences of a Greek euro exit," the Wall Street Journal quoted [Former Greek Prime Minister Lucas] Papademos as saying. CNBC television separately quoted Papademos as saying there aren't preparations underway in Greece for a euro exit.

This guy saw it coming. You don't want to know what he's shorting these days….

You can blame this stunning lack of foresight on basic incompetence, or a kind of Euro-conformity, where no one (outside of the UK, anyway) dare even to think out loud anything that might be seen as sidetracking the integration juggernaut. But I favor the catch-all explanation that Nick Gillespie and I offered in the opening chapter to The Declaration of Independents: How Libertarian Politics Can Fix What's Wrong With America (soon out in an updated paperback): "Massive, fast-paced change, whether liberational, destructive, or just plain weird, is always and everywhere underpriced." Humans have a hard time grappling with their worlds being rocked, so they just don't.

This tendency, I fear, is playing a big role in U.S. domestic policy and politics right now. Since we can't really contemplate a debt crisis, both parties essentially pretend we'll never have one, and instead propose jacking up federal spending and debt over the next 10 years, a decade during which the eternally predictable Baby Boom retirementpocalypse will be upon us. We can't really imagine the suddenness with which bond-buying sentiment could turn against us, so we keep kicking the fiscal can down the road as if it axiomatically stretches out forever. We can't really imagine America as being anything else but the world's hegemonic policeman, and we really can't imagine being unable to afford that job description overnight, and so the presidential nominee from the party of "limited government" wants to dedicate 4 percent of the national economy to military spending forever and ever, amen.

So, enjoy whatever's Greek for schadenfreude, and know that the planning disaster playing out in Brussels right now is not remotely an event for Continentals only.