Why Greece HAS to stay within the Euro Zone
In the current European Summit agenda there is the preparation for a Greece exit plan. In my view a preparation will in any case underestimate the real cost of a Greek exit that will be disastrous for Europe and not only.
As the Lehman story has taught us no preparation plan can really predict the market reaction that, in the case of a Greece exit, would be catastrophic.
Banks are not prepared for a Greek exit particularly for the run at the bank that a Greek exit would trigger in several European countries.
My fear is that a failure of Greece to respect the bailout plan would translate on a forced exit from the Euro zone mostly based on underestimated projections on what a Greek exit would really cost.
More Growth less austerity
I second the Italian and French view that more pro-growth initiatives in Europe are needed and all options, including Euro bonds, should be considered. I do not think that the German model can work throughout Europe and more flexibility is needed to avoid further damages to the already strained European economies.
In a high austerity environment there will be little chance for growth for several years ahead: in several European countries the private sector cannot, in a low grow environment, tackle important issue as high unemployment that will eventually lead to social unrest.
Banks Key to avoid a deeper crisis
The crisis of confidence in several European banks can only be contained with a strong action like allowing the ESM to recapitalize banks directly. Trust in the banking sector is paramount not just to maintain stability but to ensure more pro-growth lending to businesses.