The euro has been dying since we discovered that Greece was insolvent back in 2010. The euro will begin its death throes once one country leaves. This will create the fabled “contagion” that we have heard so much about.
Why can’t the Euro support one even one country leaving? It is just simple math. Let’s take the case of Finland, which just registered a 1% decrease in annualized GDP during the 2nd quarter. Maybe the Finns think, “We’re a small country. We simply cannot afford to help bail out large countries like Spain and Italy, so we are going to revert back to the Markka.” Finland announces its intention to restore its national currency within a month.
Now, the Netherlands is also a small country. They realize that they are going to have to chip in extra money to replace Finland’s contribution, so they announce their return to the guilder, because this option is cheaper than remaining in the eurozone.
Can you see how the cascade will start? The Germans and the French are benefiting from the weak euro, so it is in their interest to keep the currency going, but other countries can do better on their own.
Italy, Spain, Greece, Ireland and Portugal could return to a national currency immediately reducing the amount of their national debts. A return to the national currency for the Finns, Dutch, Austrians and Belgians would take them off the hook for endless bailouts and guarantees thereby reducing their own indebtedness.
Any one country leaving the eurozone will make it more attractive to others to follow.