A eurozone break-up won't be that bad

There is a consensus in the corridors of power that if any eurozone member defaults or leaves, contagion and collapse are assured. This is a fairy tale designed to frighten voters into submission to bizarre government policies. It also ignores two historical lessons.

One is that sovereign default is normal, especially after major banking crises. Only 13 of the G20 countries (the world’s wealthiest nations) existed a century ago.

Of these, only two have not defaulted. Many have repeatedly reneged. The other is that default can be beneficial. Markets already expect several EU countries to ‘restructure’, hence Greek and Portuguese 10-year government bonds are now worth 16pc and 65pc of their face value; but discussion remains a political heresy because the eurozone has some aspects of a religious cult. The result is an absence of analysis on how to manage the cyclical inevitability of default, or to reap the benefits.

It is also worth noting that for many countries default is their normal condition.