High stakes if Greece drops the euro

The burning building that is the euro may have an exit after all.

Ever since the idea of the euro currency really took off in the late 1980s, it has been accepted wisdom that entry was forever. But the leaders of France and Germany recently conceded that Greece could leave the euro.

The stakes couldn't be higher: Many economists say it could plunge the global economy into another crisis on the scale of what ensued following the collapse of U.S. investment bank Lehman Brothers in 2008. Others say it would spell the beginning of the end of the dream of building a unified Europe from the ashes of World War II.

Yet, some are saying it's the least bad of all possible outcomes, part of the only remedy available for a currency, launched in 1999, whose design flaws have led Greece and two other countries to require rescue.

A growing number of analysts say Greece would do better to cut and run, avoiding the straitjacket of a decade's worth of austerity -- the price of staying in the common currency.

The question is whether it could survive the transition. If Greece decided to go back to the drachma as its currency, there would likely be a run on its banks as depositors, uncertain of the value of the new currency, yanked out their euros -- that is, if they were given a chance.

With deposits potentially running dry, Greek banks would fail; without capital, Greek businesses would collapse and consumers would stockpile goods.

Investors would immediately begin speculating on which euro country would be next to fall, leading to the same kind of chaos across the continent.

Christopher Pissarides, a Nobel Prize-winning economist at the London School of Economics, said, "It could be the biggest bank run in history."

-- AP