Sunny Thoughts in re Europe

Bret Stephens, the WSJ's great world affairs columnist, is actually an optimist. Thus today's column is a tad bracing.

"Greece was never going to be bailed out and will, sooner or later, default. The banks holding Greek debt will, sooner or later, be recapitalized. The recapitalization will be borne by German taxpayers, and it will bring them—sooner rather than later—to the outer limit of their forbearance. The Chinese will not ride to the rescue: They know not to throw good money after bad.

And then Italy will go Greek. Europe's crisis will lap on U.S. shores, and America's economic woes will lap on Europe's—a two-way tsunami.

...

What comes next is the explosion of the European project. Given what European leaders have made of that project over the past 30-odd years, it's not an altogether bad thing. But it will come at a massive cost. The riots of Athens will become those of Milan, Madrid and Marseilles. Parties of the fringe will gain greater sway. Border checkpoints will return. Currencies will be resurrected, then devalued. Countries will choose decay over reform. It's a long, likely parade of horribles."

Ouch. Can't say I disagree. My hope is that this sequence is proven wrong thusly: sometime after the Germans let/make Greece default (and go up in flames), it scares the bejesus out of the Italians and the Spaniards and they get their houses in order and Europe muddles its way, very begrudgingly, back to some semblance of the "hard facts" era of which Stephens speaks.

Here is another fine take:

Over the past 18 months, the fiction that chronically dysfunctional, spendthrift Greece could, even with massive handouts, reform its way back to economic health has cost Europe’s taxpayers billions that would have been better spent on offsetting the costs of an early and orderly write-down of the unpayable debts of a country of little importance. Worse still, the political pussyfooting over Greece has cost governments vital credibility at home and abroad and magnified the risks to the euro that they sought to avoid.

If the idea was that pouring money into Greece would divert attention from Portugal, Spain, or Italy, the strategy backfired: financial markets reasoned that if politicians lacked the courage to face the facts in Greece, what confidence could there be that peer pressure would compel Italy and Spain to put their appalling finances in order, starting with taking a wrecking ball to demolish their extravagant publicly funded networks of political patronage? The more Merkel and Sarkozy insist that Greece’s future lies squarely within the eurozone, the more they put the euro at risk.

Once again, you heard it here first.