An analyst for UBS succinctly described the Euro Zone as the Hotel California, a song by The Eagles in the 1970s. The song lyrics describe the hotel as a place where "you can check out anytime you like, but you can never leave." That description seems to be appropriate for the nations like Greece, Italy, Ireland, Portugal and Spain who are struggling to maintain their benchmark deficit reduction goals in order to maintain their inclusion in the European Union.Unfortunately for Greece - and for all of the members of the Euro Zone, there is not structure in place for a country to leave the Euro, or to even be expelled from the Euro. Because of the common currency and the financial inter-dependence of all the nations of the Euro, if Greece were to exit, the strain would almost certainly force nations like Italy, Spain and the others to follow suit. That would essentially destroy the Euro Zone and its fragile economy and currency. And ultimately, that might be the best thing for the global economy.
The Euro Zone is essentially a loosely connected United States of Europe, except that it contains entire nations with deep historical and cultural foundations that make them much less connected then the United States of America, for example. As a result, there is much less true unity among the nations of the Euro. Their initial union was one borne of a desire for more financial and economic clout in trying to compete with the U.S. and China for global market share.
Now that the global economy is struggling, the Euro's weaknesses have been exposed and the entire experiment is facing a serious crisis. Because of inherent flaws in the structure of the Euro Zone, there is no real incentive for Greece - or any other member nation - to enforce the types of hard-line austerity measures required to get their deficit problems under control. In a matter of speaking, the weaker, poorer countries have nothing to lose in the game - their economies have essentially crumbled already.
If the big players like Germany and France decide to let them fail, it will be Germany and France who bear the financial brunt of Greece's exit from the Euro - but by continuing to carry them, the future consequences could be far greater.
