Greek crisis poses unwanted choices for Western leaders

"Anyone who thinks a Greek departure would be cleansing and not cause systemic contagion is deluding themselves," said Simon Tilford, chief economist at the CER in London. "Already we’ve seen a sharp increase in spreads and the beginnings of capital flight in other struggling euro-zone economies," with the risk of a full-blown banking crisis in Spain, where 16 banks and four regions have just been downgraded by Moody's Investor Service. ...A Greek departure would have to be accompanied by "a package of substantive reforms of how the EU is run, not just a bigger firewall, but a move to some measure of debt mutualization, of pan-eurozone bank protection and regulation and a commitment to broaden the mandate of the European Central Bank," Mr Tilford said. ..."There's a very real risk that Spain could go the way of Greece, Portugal and Ireland," which have had to seek bailouts, Mr Tilford, the economist, said. "That's a systemic risk to the euro as a whole." A Greek departure would have to be accompanied by "a package of substantive reforms of how the European Union is run, not just a bigger firewall, but a move to some measure of debt mutualization, of pan-euro-zone bank protection and regulation and a commitment to broaden the mandate of the European Central Bank," Mr Tilford said.