This week European stock markets slumped by up to 6% when the Fitch credit rating agency downgraded Greece's creditworthiness to a 10-year low. With national debt approximating 125% of national output, the country's dramatic fiscal imbalance undermines the stability and unity of the eurozone.
Being part of the euro deprives Greece of the capacity to devalue its currency or to inflate its debt. If Athens deflates and adopts a draconian fiscal contraction, social unrest looms on a far greater scale than this week's street riots on the first anniversary of a police shooting that killed a student. If, on the other hand, Greece were to default on its debts, it might be forced to abandon its membership of the eurozone. The ensuing crisis could engulf Italy and other member countries, threatening to bring down the entire edifice and dealing a massive blow to Europe's global economic credibility.
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