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Euro crisis reaching a crescendo

A general view of Athens with the Acropolis Hill in the background.

Kai Ryssdal: Today's update on the European debt crisis goes a little something like this: Greece is in trouble, and the Germans don't really want to pay for another bailout. That's an oversimplification, to be sure, but not much of one. The slightly longer version goes like this: People are slowly coming to grips with the fact that Athens might actually default, sooner rather than later. And that big banks in France, Germany, and right here, are dangerously exposed to it.

Here from the European Desk in London, Marketplace's Stephen Beard to explain. Hello Stephen.

Stephen Beard: Hello Kai.

Ryssdal: We've spoken before about how this euro crisis might end -- usually it's been in the forms of bailouts. One gets the sense though, especially after this past weekend, that it's a less pleasant ending than people are thinking about and it's much closer than anybody hopes.

Beard: Well, yes. The end is certainly night -- the end of the crisis, that is. But it could go one of two ways: The euro certainly could blow up and disintegrate, but it also could be rescued and stabilized and turned back into the reasonably firm currency that it was.

Ryssdal: Let's take the bad option first. What does it look like if the eurozone blows up, if Greece defaults and everything goes to heck?

Beard: Very ugly, indeed. The advent of the euro has led to a big increase in the amount of cross-border borrowing between the countries that use the euro. So banks, for example, are full of debt denominated in euros, but arising in other countries. So if the euro collapsed, it would be very messy. Banks could collapse, too. There's likely to be a huge credit crunch as European banks stop lending to each other, and that would quickly be transmitted to the other side of the pond, of course, because of the exposure of American banks to Europe.

Ryssdal: Let's take the happier option, then, and tell me what it looks like if there's a pleasant ending to this thing. Does it basically involve Germany paying a whole lot of money?

Beard: Yes, it does. The euro could be saved, but it needs solidarity. If the eurozone united and said, 'OK, we're all in this together, we're all using one currency. We've got to support each other,' the euro would survive. And that, as you say, effectively means Germany being prepared to bail out other countries in trouble. The German people are not wildly enthusiastic about this. They see themselves as disciplined, they tend to pay their taxes. They don't see why they should shovel large amounts of their hard-earned cash down to Greece, where tax dodging is a national pastime and corruption is rife.

Ryssdal: Let me see, though, if I can put it in more black and white terms. Which one is more expensive? Is it more expensive to let the euro collapse or is it more expensive to bail out five to six small- to medium-sized European economies?

Beard: It's much more expensive to let the euro collapse. There was a study by UBS, the Swiss bank, recently indicating that if Germany had to pick up the pieces following the collapse of the euro, it would cost six times as much -- at least six times as much -- as it would cost to bail out the weaker members. So it does seem that it's going to be much cheaper for Germany to carry on bailing out the good, but leaky ship euro, rather than see it sink.

Ryssdal: Very quickly Stephen, on the way out, my premise that we started with that the end is closer somehow than it has seemed in the past, do you agree?

Beard: Yes, very much so because you have leading German politicians and officials talking quite openly about Greece defaulting and Greece leaving the eurozone. And that's a very strong signal to the markets: This crisis is reaching some sort of crescendo soon.

Ryssdal: Stephen Beard in London for us. Thank you, Stephen.

Beard: OK Kai.

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