Peter L. Berger's Blog, page 650

Nuclear Power the World’s Great Green Hope

The world’s current generation of nuclear reactors are aging, and as countries like the U.S. and France balefully eye the massive new price tags sure to come with the maintenance of these older facilities and the installation of newer projects, a swathe of exciting new technologies promises to remake the industry. The FT reports:

Nuclear energy has received much more government funding over the years than other low-carbon sources but, [Bill Gates] says, it is still “failing on cost, safety, proliferation, waste and fuel shortage”. His favoured technology for the future, in which he has invested heavily, is the traveling wave reactor.

The TWR is a “fast reactor” loaded with depleted nuclear waste at the beginning of its life which then breeds and burns its own fuel over a period of decades. “The big advantage of the TWR is that you have a lifetime of fuel within the reactor,” says Paul Howarth, managing director of Britain’s National Nuclear Laboratory. “But it would be a big and expensive reactor.”[A] prototype fusion reactor being shown in London next week is a miniature version of the doughnut-shaped “tokamak” design adopted for the ITER fusion megaproject in France, whose costs are rising towards $20bn. “Compact fusion power is no longer just a pipe dream,” says David Kingham, Tokamak chief executive. “We are aiming for that ‘Wright Brothers’ moment of take-off for fusion energy within 10 years.”

The next generation of nuclear reactors have myriad advantages over the world’s current fleet, on issues like safety, nuclear weapon proliferation, fuel, waste disposal, and—with modular prototypes already in the works—adaptability. There’s no shortage of developments in the nuclear industry to get excited about.

Bill Gates sees the potential this energy source has for a greener future, and while the self-styled eco-leader Germany has moved backwards on this front by shuttering its nuclear fleet in reaction to Fukushima, the environmental movement seems to slowly be coming around to nuclear’s advantages. Chief among those advantages: the fact that these reactors are effectively zero-emission baseload power sources, a crucial component of any future green energy mix.The nuclear industry understandably moves slow—the capital investments for new plants are so huge, the potential risks of meltdown so serious, and the resultant regulations so extensive that we shouldn’t expect these newer technologies to disrupt the status quo with the same alacrity that a smart start-up in today’s information economy might. Still, there’s no denying: there’s a lot to look forward to for nuclear power.

Turkey Threatens To Invade Syria

Turkey’s President Recep Tayyip Erdogan has reportedly authorized the modification of the country’s rules of engagement, which would allow for Turkish forces to attack targets inside Syria. Is Turkey finally getting serious about locking down its border to ISIS? Yes, but that’s not Erdogan’s main focus. The plan is being put in place in order to prevent the emergence of a Kurdish state on Turkey’s doorstep. The Telegraph:

Following Mr Erdogan’s speech, Turkish media were briefed on new orders being given to the military to prepare to send a force 18,000-strong across the border, with some reports saying the move could take place as early as Friday.

The troops would seize a stretch of territory 60 miles long by 20 deep into Syria, including the border crossings of Jarablus, currently in Isil hands, and Aazaz, currently controlled by the Free Syrian Army but under attack from Isil.The buffer zone would kill several birds with one stone. As well has allowing Turkey to establish refugee camps not on its soil but under its protection, it would prevent the two current zones of Kurdish control – from Kobane to the Iraq border in the east, and Afrin in the west – from joining up.

Turkey’s security cabinet released the following statement after its meeting with Erdogan:

The developments taking place in our southern neighbor, Syria, have been assessed in detail and additional measures taken along our border have been reviewed. Concerns over terror acts targeting the civilians in the region as well as attempts for demographic change have been voiced.

(The reference to “demographic change” are in response to widespread (albeit disputed) reports of Kurdish fighters driving Arabs and Turkmen from the territories they have secured.)

Though the plans are being formalized, their actual implementation is less likely than would appear given the bluster coming out of the government. Hurriyet reported today that the Turkish Armed Forces would prefer participating in an international bombing campaign to sending their young foot soldiers into the meat grinder that is Syria’s civil war. And most of the opposition parties, at least some of whom would need to participate in a coalition with Erdogan’s recently-chastened AKP, are against getting involved as well.Is this enough to keep Turkey from going in? We shall see. But if the Turks do ultimately get inolved, it will represent yet another critical milestone: this mess of a war will have started to suck its stable neighbors in. The costs of earlier inaction by the United States, at a time when a concerted blow might have made a difference, will have to be measured on a completely different scale.

As Iran Deadline Slips, Keep an Eye on the Holidays

Iran’s foreign ministry announced on Sunday that the the P5+1 negotiations scheduled to end on June 30 will have to be extended. With the announcement, Iranian foreign minister Mohammad Javad Zarif returned to Tehran Sunday night to consult with the country’s leadership. A senior U.S. official said that “some progress” had been made, but that “a number of unresolved issues remain”—boilerplate language that has remained virtually unchanged since the April 2 interim agreement was signed in Lausanne.

The pace of sanctions relief appears to be the sticking point but Iran’s Western interlocutors appear to be holding firm—for now. British Foreign Secretary Phillip Hammond appeared to be digging in his heels: “No deal is better than a bad deal,” he said. Meanwhile, a senior U.S. diplomat that it would be “really absurd” to think that America would cave after negotiating for this long. (Much like being cool, if you have to say so…)The slippage of the June 30 deadline is not entirely unexpected, nor really all that consequential. But coming up shortly is a deadline of real consequence: July 9. If the Administration does not submit an agreement to Congress by then, the review period under Corker-Menendez extends from 30 to 60 days. During that time, the Administration cannot by law lift sanctions, while Congress reviews and possibly votes on the deal.The extended timeline was created to make sure Iran (or, cynics might suggest, the Administration) could not take advantage of Congress’ August recess to force a quick vote (or, heaven forfend, a recall). Now, though, the legal deadline’s consequences might be felt in Geneva.Holidays, high diplomacy, and warfare have a long, strange history.  The tempo of crises during the run-ups to both World War I and World War II were dictated in part by the British Parliament’s vacation schedule, and as many diplomats can tell you, a truly sophisticated understanding of international affairs includes understanding that sometimes crises are flubbed because everyone is simply at the beach (or eating Thanksgiving turkey, etc.)As we get further into the summer, we start running into a bunch of these: July 4 weekend (i.e. July 3), the Congressional recess starting on August 4, Labor Day. Look for them (plus the July 9 deadline) to create unexpected bumps and disruptions in negotiations—or, if Iran is as canny as they’ve proven to be so far, for Tehran to use them as times to test and probe the U.S. position, diplomatically or otherwise.

Weimar Russia, 1995–2015

In an op-ed published in the Washington Post on March 17, 1995, I argued that Russia was “deprived of pride and self-respect. . . . The public—its pride deflated and its economic needs unmet—craves order at home and respect abroad. The authoritarian temptation is pervasive, and so is the urge to be—and to be seen—as strong once again.”

In her perceptive and very informative analysis published in The American Interest on June 2, 2015, Lilia Shevtsova sheds new light on the Kremlin’s “Weimar syndrome” by showing how President Vladimir Putin and his acolytes blame the West, especially the United States, for Russia’s sense of humiliation. She quotes prominent Russian—and American—apologists for Putin’s politics at home and his aggression abroad; these commentators cite the similarity to the West’s humiliation of Weimar Germany as the explanation for Russian conduct today.Three brief comments are in order.First, “Weimar” is not the only historical example for Russia or other humiliated countries to emulate. After World War II, Konrad Adenauer’s Germany pursued another path. True, it took years of soul-searching, but in the end Western Germany and, since the collapse of communism, a reunited Germany chose not to blame the West for its past behavior or subsequent fate. Nor does Germany blame the United States today for its problems and difficulties. On the contrary, Germany has become a mature and responsible member of the international community. Not incidentally, its attitude toward Jews has been exemplary, so much so that Russian Jews are happy to settle in Berlin these days. Why doesn’t Russia emulate Adenauer’s or Willy Brandt’s Germany? Do Russians remember Brandt’s heartfelt plea to Poles to forgive his country for the barbarities Germans committed in World War II? Instead of apologizing for invading their country, as Brandt had done, Putin went to Hungary earlier this year to visit the graves of Russian soldiers who lost their lives in and around Budapest in 1956.Second, the West has certainly not tried to humiliate Russia. As early as 1991, President George Bush went to Kiev to warn Ukrainians against “suicidal nationalism.” His famous (or notorious) “Chicken Kiev” speech was intended to calm Moscow’s fears that the West would take advantage of Russia’s weakness. Under different Russian Presidents—Boris Yeltsin, Dmitry Medvedev, and Putin—the West paid for economic stabilization and for protecting the country’s nuclear weapons and facilities, and it supported Russia’s admission to the Council of Europe and the World Trade Organization. The West even expanded the G-7 into the G-8. To alleviate Moscow’s concerns, Washington helped found the Russia-NATO Council, leaving the door open even to the eventual, if unlikely, admission of Russia to NATO. Only in the aftermath of the Kremlin’s aggression against Ukraine did the United States decide to deploy military equipment and a small force in Eastern and Central Europe. What else could the West have done? If Russians still feel humiliated, it is because of their leaders’ wish to divert attention from their own corrupt practices and their own incompetence to Western “machinations.”Third, Putin himself has had personal reasons to identify with, and presumably make up for, Russians’ sense of shame and humiliation. The “macho” image he cultivates responds not only to what his people appreciate as they see themselves in their leader’s image; it also serves to compensate for Putin’s own less than successful experiences as a child and an adult.Relatively little attention has been paid in the West to Putin’s uncertain and unhappy childhood. Russian historians and investigative reporters maintain, for example, that parts of Putin’s official biography are simply false. Even his mother might well have been someone else; the testimony of a woman who claims to be Putin’s mother, available on video, is quite convincing. Called Uti-Puti in school because of his duck-like walk, Putin resented the teasing (for his small build) that was his fate. His early interest in and attachment to the KGB, according to Yuri Felshtinsky and Vladimir Pribilovsky, among others, stemmed from an almost desperate search for both a family and a means to settle scores with a world that hurt and damaged him. His assignment to Dresden, an unimportant East German outpost where he had little or nothing to do, certainly did not enhance his self-esteem. Hence, coping with humiliation is part and parcel of Putin’s life. It is a source of his easy identification with his elite’s, and more generally the Russian people’s, determination to project strength where there is weakness, and to make others accept blame for the well-deserved failure of the Soviet system itself.Many countries have managed to overcome self-pity after traumatic experiences. Consider the examples of Great Britain and France and other imperial powers after World War II. Consider the example of China after the Cultural Revolution. Consider the example of the United States after Vietnam. Fully or partially, they have learned to sort out and handle their own crimes and faults. With considerable difficulty, it is true, they have come to behave like adults by accepting their limitations. Weimar RussiaPublished March 17, 1995, Washington Post In his astute analysis of Russia’s predicament, Peter Reddaway convincingly shows that President Boris Yeltsin has all but abandoned the course of reform he began in 1991.The point that needs to be added is that Yeltsin’s about-face is a symptom, not the cause, of Russia’s plight. As the transition from one-party rule and the command economy to today’s chaotic conditions has benefited few and alienated many, public support for reform has yielded to pressure for retrenchment.In Moscow, members of the small biznis class can afford to rent a dacha for more than $5,000 a month, eat out at a fashionable Swiss restaurant where the main course costs $40, and pay $3.25 for a slice of Viennese torte. By contrast, the vast majority of the Russian people, who earn less than $100 a month if employed, are worse off than they were under communism.The nostalgia they feel for an improved version of the bad old days of order, however oppressive, and the welfare state, however meager, is as understandable as it is unfortunate. They walk by Moscow’s elegant storefronts that display expensive Western-made goods priced in dollars, not in rubles, wondering what has happened to their lives and to their country. They look for scapegoats at home and abroad.Showing disturbing similarities to Weimar Germany of the 1920s, Russia is a humiliated country in search of direction without a compass. It is smaller than it has been in three centuries. Both the outer empire in Central and Eastern Europe and the inner empire that was the Soviet Union are gone, and Moscow must now use force to keep even Russia itself together. As its pitiful (and shameful) performance in Chechnya has shown, the military has been reduced to a ragtag army, with presumably unusable nuclear weapons. Four thousand five hundred rubles—worth more than $4,500 only a few years ago—are now gladly exchanged for one dollar. For its very sustenance, Russia is at the mercy of the International Monetary Fund, which can palliate but surely cannot cure the country’s economic ills.Worse yet, Russia is deprived of pride and self-respect. There was a time, during World War II, when the whole world admired the Soviet military for its extraordinary boldness and bravery. There was a time, in the 1950s, when several ex-colonies of Asia sought to emulate the Soviet model of rapid industrialization and when Soviet science moved ahead of the United States in space research. There was a time, from the 1920s through the 1970s, when many—too many—Western intellectuals and others believed that Soviet-style communism was the wave of the future. And there was a time when then-Foreign Minister Andrei Gromyko claimed that no significant issue in world politics could be settled without Moscow’s concurrence.To appreciate the present mood of letdown and frustration, imagine that our currency became all but worthless; that our stores identified some of their wares in the Cyrillic rather than the Roman alphabet, showing prices in rubles; that our political and economic life were guided by made-in-Moscow standards; and that our leaders were lectured by patronizing foreign commissars about the need to stay the course in order to join their “progressive,” which is to say the communist, world.In the final analysis, the condition of Weimar Russia is alarming because it is at once a weak democracy and a weak police state, pluralistic and yet intolerant, pro-American in its promise but anti-American in its resentments. The public—its pride deflated and its economic needs unmet—craves order at home and respect abroad. The authoritarian temptation is pervasive, and so is the urge to be—and to be seen—as strong once again.The West may defer the day of reckoning, but it cannot obviate the Russians’ eventual need to compensate for the humiliation that is their present fate.

What Hawaii Can Teach Us About Solar Power

Hawaii’s geography makes it well-suited for renewable energy—it’s forced to import and burn oil to generate electricity at great cost, and its sunny climate makes solar power an obvious choice. But for a state intent on going 100 percent green in just thirty short years, worrying signs of strain on power grids are already starting to appear. The WSJ reports:

…Hawaii’s grid is already running into problems with its heavy helping of rooftop solar and other carbon-free renewables. Among them: sudden swings in the output of solar and wind, which force the state’s main utility to scramble to try to keep the overall supply of power steady. […]

Though Hawaii’s effort is attracting attention around the globe, its electric system is unusual. For starters, each island has its own electric grid, and they aren’t connected. On the mainland, three big power grids serve 48 states; typically, the bigger the grid, the more stable it is. […]More than 50,000 houses in the state act as tiny power plants, putting any electricity that they don’t use onto the grid. But grids were designed to zip electrons across high-voltage wires from a few big power plants to homes and businesses; they were not made to work the other way around. Traditional power plants weren’t designed to ramp up and down quickly, either—making it tough to absorb bursts of solar power added to the grid on sunny days or make up for a sudden drop on cloudy ones.

Grid stability is often overlooked or glossed over by renewable energy activists, but it remains a high hurdle communities will have to clear to significantly boost the share wind and solar have in the overall energy mix. Most grids as currently arrayed just aren’t equipped to send power in two directions, and as a result are destabilized when smaller, more distributed, and much more numerous solar and wind energy providers start providing power.

To make matters work, these renewables producers can’t contribute when the sun isn’t shining or the wind isn’t blowing, meaning they need to draw from the grid during certain times of the day. Lacking any cost-effective commercial-scale energy storage options, that means Hawaii will continue to have to rely on fossil fuels for those cloudy, windless days.The Aloha State is fashioning itself as an American leader in solar energy, but is finding out that blazing that trail is a much tougher task than most greens like to think it is.

Japan Wary of Constitutional Change

A week after Shinzo Abe’s LDP passed a measure extending the current session of parliament by an unprecedented 95 days in order to allow for more debate on proposed changes to Japan’s pacifist constitution, the debate is not going in Abe’s favor. :

The percentage of voters opposing Abe’s cabinet rose to 40 percent, the highest since he took office in December 2012 promising to reboot the economy and bolster Japan’s defense, according to a survey by Nikkei business daily and broadcaster TV Tokyo. Support slipped three points to 47 percent.

A majority – 56 percent – opposed Abe’s plan to end a self-imposed ban on exercising the right of collective self-defense, or militarily aiding a friendly country under attack, a move that could allow Japanese troops to fight abroad for the first time since Tokyo’s defeat in World War Two 70 years ago.

Echoing other surveys, the poll showed 81 percent feel the government’s explanation for the change has been insufficient.

Reuters goes on to point out that the LDP coalition has enough votes to ram the bill through parliament, but is hesitating due to the wretched poll numbers. What happens in September if the polls stay stubbornly low is anyone’s guess.

One thing is for certain: China would do well to keep its aggressive moves to a minimum this summer if it hopes to keep Japan out of the game. The Japanese leadership is already concerned enough about what China has been up to. Any headline-grabbing shenanigans in the South or especially the East China Seas are sure to be latched onto by Abe to prove that Japan has got to step up in the 21st century.

€60 a Day: Currency Controls Hit Greece

Greeks woke up this morning to shuttered banks, after the European Central Bank voted on Sunday against extending liquidity assistance past the already approved cap. The ECB will revisit its decision on Wednesday, but it’s hard to see how it can send more money to beleaguered Greek bankers since the eurogroup voted on Saturday to revoke its offer. Meanwhile, on Wednesday Greece is due to miss its payment to the IMF and will be judged to be in default. While Greek PM Alexis Tsirpas has called for a referendum on July 5, this has an uncertain future: some of the measures taken to stem the bank panic may have made Grexit more or less inevitable (it’s also difficult to understand what exactly the referendum is going to be on, given that the offer which was to be voted on is presumably no longer on the table.)

Prophecies of doom should not be overstated in the wake of this news. For Europe as a whole, the news may actually turn out to be good, at least in the long term. As Walter Russell Mead wrote on Sunday, the eurozone will finally get to cut loose a member state that never should have been allowed to join in the first place, and gains some much-needed time to reexamine its long-term trajectory.For the Greeks, on the other hand, things are about to get wild. Currency controls are much harder to undo than to put in place. The eurozone creditors (and the IMF) as much as the debtors are making things up on the fly, but the crew leading Greece has proven to have an especially uncertain hand on the tiller.For your average Greek, the financial results are fairly dire. As The Financial Times reports:

The shutdown of the banks will last until at least July 6 and cash withdrawals will be limited to €60 a day, according to a Bloomberg report citing a statement by the Greek government.

The cashing of cheques will be halted and fixed term deposits will be locked down. The Athens stock exchange will also be closed.

For the country as a whole, meanwhile, the range of possibilities that lie ahead are wider (and weirder) than one might think. As WRM noted in February, analogies to the present situation in Athens may more easily be found in Latin America than in northern Europe. Greece, like many Latin countries, has historically been subject to a cycle of populist failure, doubling down on demagoguery, and then backlash. Whether Grexit will lead to backlash or doubling down remains to be seen, but while the Greeks may come to their senses, Caracas on the Aegean is also not beyond the realm of reason. (The West is frankly lucky that Russia is so poor right now, but Moscow still could cause some real problems as its Orthodox “little brother” tries to find its way.) And grim as all of this is, it also supposes that contagion will not spread to the wider European markets—in which case, we may well have bigger problems to worry about.

Many have been eager for the Greek crisis to finally break, if only from a desire to “get it over with.” But there are reasons why the eurocrats fudged and hemmed and hawed for so long on this one. What’s done is done, though, and we are likely finally to see, one way or the other, how Grexit will really play out.

Britain Deals Fracking Another Blow

Britain’s shale prospects were dealt another blow today as the Lancashire County Council denied permits for four new exploratory wells in northern England. The NYT reports:

Before the vote, councilors spoke emotionally against the plan, saying that it would mar the landscape, create unacceptable levels of noise and might also saddle the county with pollution problems years down the road. The rejection was greeted with loud applause by shale opponents.

In a statement on Monday, Greenpeace called the decision “a Waterloo for the fracking industry and a triumph for local democracy.” Greenpeace said the decision sent “a powerful signal to other councils that the fracking juggernaut can indeed be stopped.”

This decision is the second setback for British fracking in the past week, as last Friday the Lancashire County Council rejected a bid from the same company to drill exploratory wells on a separate site.

Britain has copious amounts of shale gas, and with the new Cameron government seemingly more committed than ever to exploring those reserves, it looked as if the country might be looking to follow in America’s footsteps. But concerns over increased traffic, noise and water pollution, and damage to the bucolic English landscape have dealt a serious blow to hopes for a shale energy renaissance.Over and over again we’ve seen shale fail abroad as firms and governments find out how difficult it is to imitate the American experience. Britain lacks the mineral rights afforded to property owners here in the U.S., so local landowners have little incentive to cheer the discovery of new oil and gas finds under their property. Many of the American shale discoveries have occurred in areas with low population density, making it easier for fracking firms to negotiate with local communities to commence drilling.The rest of the world isn’t doing much better in playing catchup on shale. Argentina and China are the only two countries outside of North America producing commercial quantities of shale gas. The EIA reports that “[f]or the last two years, China has drilled more than 200 wells, and Argentina has drilled more than 275 wells,” putting both countries well ahead of non-starters like the UK, but far behind the United States.Whoever said fracking was easy?

A Greece of Our Very Own

Puerto Rico’s governor did not mince words in an interview given to the New York Times last week but published yesterday: 

“The debt is not payable,” Mr. García Padilla said. “There is no other option. I would love to have an easier option. This is not politics, this is math.”

It is a startling admission from the governor of an island of 3.6 million people, which has piled on more municipal bond debt per capita than any American state. […]

He said creditors must now “share the sacrifices” that he has imposed on the island’s residents.

“If they don’t come to the table, it will be bad for them,” said Mr. García Padilla, who plans to speak about the fiscal crisis in a televised address to Puerto Rico residents on Monday evening. “What will happen is that our economy will get into a worse situation and we’ll have less money to pay them. They will be shooting themselves in the foot.”

The commonwealth currently has more than $72 billion in outstanding debt—roughly eight times the face value of Detroit’s. Unlike Detroit, however, Puerto Rico is not eligible for federal bankruptcy protection, and since it is not a country, it is also ineligible to seek outside funding from the IMF. And most importantly, unlike Greek debt, which is largely now owned by the IMF and European Central Bank, Puerto Rico’s municipal debt is scattered across “safe” portfolios of millions of American investors. Even if you’re not an active market participant, your pension fund is probably on the hook.

As if to underline the governor’s talking points, a new report was released on Sunday by the Puerto Rican government that had similarly bracing language: “Probably the most startling finding in this report will be that the true fiscal deficit is much larger than assumed,” the report said. “Even a major fiscal effort leaves residual financing gaps in coming years, which can be bridged by debt restructuring.” Brace yourselves, America. This could be a bumpy ride.

What a Grexit Could Mean For the Euro

There are lots of things to worry about in the face of an ever more likely Grexit, but the future of the euro isn’t one of them.

The credibility of the euro depends on the credibility of the rules, the institutions and the political will behind it. A Grexit won’t affect that much; indeed, a Greek exit may end up strengthening the credibility of the euro by removing the one member that all agree should never have been allowed to join in the first place.The euro has never been ‘irreversible’ the way the dollar is or the Deutsche Mark was irreversible. Bavaria was not going to drop out of the DM and Oregon isn’t going to drop out of the dollar. The euro is clearly a multinational project, and there are always risks and uncertainties when different sovereign nation-states cooperate on a project. That was true five years ago and it remains true today.The deeper question for the future of the euro is whether countries like Italy, Spain and even France are ready, willing and able to do what it takes to prosper in a currency union dominated by Germany and including ‘hard money’ partners like the Netherlands, Finland and Austria.At the same time, the question is whether the hard currency countries are prepared to compromise their principles to hold the monetary union together as the soft money countries slowly move toward reform.Those were open questions five years ago and they are still open today. However, we have learned some important lessons about political will in the north and the south. On the whole, the news is good. The northern countries, reluctantly, have been willing to allow the ECB to provide substantial relief to the southern countries. The southern countries, reluctantly, have continued their efforts at reform.The political will to maintain the euro remains strong, and investors and currency speculators are likely to take note of this in the future.From the beginning, Greece has been in a different category from countries like Italy and Spain. It was a terrible candidate for the common currency, and only ‘met’ the targets by cooking its books. Greece’s inability to meet the targets legitimately and the moral and political bankruptcy revealed by the willingness of its political class to cook the books on a matter this grave should have disqualified Greece from the beginning. This kid wasn’t ready for college and shouldn’t have been accepted.Putting Greece in the euro weakened the credibility of the currency right from the start. The willingness of European authorities to turn a blind eye to the wholesale chicanery in Athens weakened the common currency and undercut the currency’s credibility among financial market participants from the start. The bad decision on Greece was a sign that the Europeans weren’t taking the task of building the euro seriously enough, and that they were letting political and even populist considerations distract them from the extremely serious business at hand.So forcing Greece out could end up being good for the eurozone. The message would be clear: the rules are real and the Europeans are committed to managing their common currency in a serious way even when there is a political price to be paid. A Grexit at this point will probably reassure investors and savers around the world in the medium term, even if it unnerves them short term. The exit under duress of a member that can’t or won’t play by the rules shows that the euro is a solid currency that can be trusted, and will bolster its reputation as a store of value.Those who fear the consequences of Grexit for the euro look at how the Grexit might affect countries like Italy and Spain? Will the spectacle of a Grexit lead speculators to attack Italian and Spanish bonds and banks stocks at any sign of economic difficulty? There would be huge amounts of money to be made for investors who short Spanish or Italian assets if those countries should be driven from the euro in a new crisis. If the sharks scent blood in the water, will a feeding frenzy begin?We’ll see what happens to Spanish and Italian bond yields this week, but in the medium to long term, Grexit might not change the rules of the game very much. As long as Spain and Italy want to remain in the euro and are willing to play by the rules, markets are likely to think that the rest of the zone will work to keep them on board. That would change if another European country started speaking in Greek. If, for example, Podemos won the next election, formed a new government in Spain, and launched a confrontational bargaining strategy with the rest of the eurozone, many investors would head for the hills. But that would happen whether or not Greece leaves the euro. It would happen in Italy if an anti-euro party won the election. It would happen in France if the National Front came to power.Overall, however, the biggest factor in the confidence markets have in the euro going forward will be their assessment of the wisdom and sustainability of the policies that back it. If reforms in Spain and Italy bear fruit (and there are signs this is happening, though painfully slowly and the progress could come apart very quickly) or, better yet, a virtuous circle sets in—reforms lead to better performance, better performance creates the political support for more reform—then both Southern Europe and the euro would have a bright future, whatever does or doesn’t happen in Greece. The markets already understand that the euro is in trouble; a Grexit won’t tell them anything they don’t know and the fortunes of European bond and stock markets are likely to continue to reflect fundamental assessments of the health of currency union and the prospects for growth.There is one way a Grexit could introduce more instability into European financial markets over time: what if the exit has a happy ending for Greece? If it exits the euro and after a wrenching adjustment things start going fairly well fairly quickly, the EU’s laggards will take notice and their anti-euro parties would grow stronger. Greek success outside the euro could weaken the political consensus inside Italy, Spain and France behind the common currency. That could start to have an impact on investors, who might start to wonder whether those countries are really committed to the project with all its difficulties.There are many good reasons even at this very late date to try to find a way to keep Greece in the euro. But these reasons are more political than economic. There has never been a good economic case for Greek euro membership; there has always been a good political case. That remains true today.What the Europeans need to do now is to stop letting Greece suck all the oxygen out of the room. Big questions about the future of the common currency remain. These questions need sustained attention and perhaps policy changes in both the north and the south of Europe. The Greek drama has cost months of time as European leaders and policymakers have engaged with the grandstanding Syriza politicians. Time to move on, one way or another.