The euro crisis: The Greek run - The Economist

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If Greek voters deserve greater honesty about the Grexit, so do those in the rest of the euro zone. Greece may be a small economy, but a Greek departure from the euro, amid brinkmanship and bluster, would not be a small event. Most obviously, exit--and the subsequent default on its private as well as official debt--would cost European banks, firms and taxpayers a lot of money. And that is without counting the danger of a general contagion in weak euro-zone economies.

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[The] dangers require urgent action. First, to prevent a mass run, the European Central Bank must be ready to flood the Greek banks with liquidity--raising the losses to European taxpayers if Greece does eventually leave. And second, to stop a Greek exit being followed by a cascading loss of confidence in other peripheral economies, the euro zone must undergo much faster acceleration towards fiscal and financial integration than most European politicians will admit.

To safeguard banks in Portugal or Spain from runs, European policymakers will have to set up some form of euro-wide deposit insurance. And to reassure investors in the sovereign-debt markets, there will have to be much quicker progress to some form of debt mutualisation among the single currency's members. The Europeans should have started work on these things during the lull in the crisis earlier this year. Germany resisted that. Now these changes must be done in a rush.