Adam Jasser (Polish, Reuters journalist-turned-pundit, good egg) argues that the grim problems besetting Greece and its public finances could lead to the Eurozone getting even stronger:

The argument goes that a default would require Greece to leave the euro zone and increase pressure on other peripherals such as Spain or Portugal. In the extreme case, they might also be forced  to quit the euro zone to restructure their economies through a devaluation rather than deflation.

Many analysts doubt this scenario would come to pass but even if it were, I fail to see why an exit of its weakest members would be harmful to the euro zone. The reverse logic would imply that the presence of  Greece inside the euro zone boosts the currency’s credibility. Any takers for that?

So let’s be clear – the risk associated with Greece’s hypothetical exit from the euro zone is squarely sitting with Greece itself (hence the premium it pays on its bonds). Far from shorting the euro, investors should be buying the currency if the euro zone exit scenario for Greece came closer to reality. 

Of course there is a question of the point at which a potential euro zone exodus would gain critical mass to undo the currency. Would Spain, Portugal and Greece be enough? Probably not. How about Italy and Ireland? Possible, however, even then investors might judge that a euro zone with Germany, France and the Netherlands at its core plus Finland and a few advanced central Europeans might not be a bad thing at all.

A lively point of view, although it comes across as a bit like arguing that a diseased body is all the stronger once the many large diseased bits are amputated.

True, but somehow not quite capturing the key point (namely how one defines ‘healthy’) or allowing for the convulsions involved as the patient lies screaming on the operating table as Reality sharpens the carving-knife – and mentions that alas there will be no anaesthetic. 

In all the talk about the pain inflicted on countries in the Eurozone which fail to run their affairs sensibly it is overlooked that that pain is the WHOLE POINT.

Because there is no ready way to bail out profligate countries, and because a wide single multilingual/multicultural currency zone has stickiness in terms of the way people move about (ie it is quite unlike the USA), the threat of that horrible pain is what is meant to compel slack members to reform their ways.

Which is why Adam is dead right here:

The EU is therefore right to begin pondering how to enhance policy coordination and strengthen the community’s ability to fine tune individual economies. Convergence criteria will most likely have to evolve to include a limit on current account balances and an enforcement mechanism for sticking with the rules will have to be put in the hands of the Commission. 

But all of that falls short of what is really required. What the euro is clandestinely working towards (like a sleeper planted by the EU “federalists”) is a far-reaching unification of the social and economic models that today function in the EU.  The existence of variously efficient pension systems, labour market rules, business environments and tax regulations are the root cause of the imbalances inside the euro zone…

In short, the Euro will work properly only if national economic decision-making can be superseded by ruthless EU-level decision-making to ‘fine-tune’ a national economy if a country gets too far out of order.

Lots (lots) more harmonisation towards a ‘federal’ Europe, where Germany calls the ultimate shots.

Maybe some countries will think this is just too high a price to pay for ‘integration’, and either retreat gracefully from the Eurozone in due course or crash painfully out of it.

Either event could be quite a good outcome, paving the way for a quite new set of variable geometry relations between all EU member states and eg Turkey/Ukraine too, which, being based on experience of how such ‘deep’ integration works (and has to work) in practice, will be all the more acceptable to the various populations of our happy continent.