One money, too many markets

Europe's monetary union is screeching toward the abyss, unintentionally, but apparently inexorably. Greece is most unlikely to meet the criteria to receive further financial assistance from its eurozone partners and the International Monetary Fund. Europeans will then need to decide whether to let Greece go. The exit option would not improve Greece's chances of successful adjustment, and it would come at a steep price for the eurozone: It would be "in the money" - and priced accordingly.

A Greek exit could, one hopes, be managed. The European Central Bank would contain the collateral damage by flooding Europe's banking system with liquidity (against sub-par collateral). Or it will reluctantly relaunch its purchases of public-sector debt in secondary markets, capping the other peripheral eurozone economies' interest-rate spreads relative to the core.

Thus, dire circumstances would once again force the ECB's hand. As the strongest European institution, it is systematically vulnerable to being taken hostage, compelled to underwrite a further lease on life for the euro. In this light, ECB President Mario Draghi's recent vow to do "whatever it takes" to save the euro came as no surprise.