Europe Must Face Ugly Reality of Greek Exit from Euro

A Greek exit from the euro area has the potential to be the European Union’s most economically and politically destructive event of a generation. Unfortunately, Europe has reached the point where it must prepare for such an outcome.

Whether Greeks want it or not, circumstances could soon force their country to return to the drachma. Europe’s leaders, as Luxembourg Prime Minister Jean-Claude Juncker hinted, might extend Greece’s deadlines to meet the budget targets required for rescue money, but they won’t provide emergency financing to a government that refuses austerity measures. Without Europe’s help, Greece’s government (whoever ends up leading it) faces a dilemma: Cut spending even more than under the austerity program, or default on its debts and print a new currency to pay its bills.