One of the most interesting set of questions to arise out of the Greek crisis in the eurozone is whether – and, if so, what – institutional changes are needed to make it easier to manage disarray of this kind.
Some would argue that there is really no problem. When countries within the eurozone get into difficulty, they are supposed to look after themselves. The European Central Bank should continue to look at the performance of the economy as a whole. Meanwhile, given the “no bail-out” provisions of the treaty, each country must be on its own. If a country cannot raise the money it needs to finance its government, it has no choice but to raise taxes, cut spending and, in extremis, restructure its debt. The latter is likely to mean a deep recession, not least because the private sector is likely to be badly affected by a sovereign default. This would be particularly true for the financial sector.