All you have to do is to think through what happens next after an exit and it begins to look like a really serious threat. The really criminal thing is that it could easily be avoided if there was the political will to do it. It seems to me that there are at least five significant areas of concern.
1. If Greece can leave so can other countries. Interest rates in Spain and Italy are already rising and will go up as soon as any exit is confirmed. This will slow down their economies and reduce exports to them from Britain but it will also create pressure to put up interest rates and mortgages in Britain. Increased uncertainty almost always increases interest rates.
2. As soon as Greece looks like it is going to leave the Euro everyone in Greece will try and get their money out of the bank whilst it is still in the form of valuable Euros. A Northern Rock style run on every bank in Greece might just possibly be controlled by placing strict limits on how much each person can take out of their bank account in a week but there is no certainty. Letting one bank collapse has a nasty tendency to weaken other banks and push them into a downward spiral. As we learned 8 years ago to everyone's cost. Letting Lehman Brothers go to the wall didn't turn out so well did it.
3. Worries over the Euro will push the pound even higher in the foreign exchange markets for a while. Nice if you are going on holiday but horrible if your job depends on your employer selling anything abroad. Already the pound is at 1.39 to the Euro which is more than 20 cents increase in less than a year. That makes our products and services really expensive. And of course what goes up can come down. After the immediate crisis is over all that hot money may decided to leave the UK at any moment. Would you leave your money in a country with a balance of payments deficit of 6% that has gone on for years? That is the situation in the UK and we could find that a sky high pound is eventually replaced by a sudden rush out of sterling causing even more damage.
4. If Greek people owe any money in Euros - say on their mortgages - then they are highly unlikely to be able to pay that money back out of earnings in Drachmas. An exit would therefore make a lot of Greek people bankrupt and give mortgage companies a big increase in their bad loans. Not a good thing to do at a time of nervous and instable markets. We would be impoverishing a whole nation in order to increase risk and instability.
5. The Greek government will have to default on all its foreign debts. Someone owns all that money. It could be your pension fund. In that case you will directly lose out. There is then the risk that international investors will start to speculate on which banks across Europe have lost money and lose trust in a lot of them. This could put us back into another banking crisis. There are also plenty of speculators who are quite content to make vicious financial gambles on which country can be forced into a default next. You can make a lot of money for yourself by selling government debts that you don't own and buying them back at massively reduced rates. Forcing pain on Greece exposes many other countries in Europe to the risk that they are next. Once sovereign debt crisis start then there is no telling where they will end.
So if a Greek exit really is a big problem then what does a solution look like? Well asking Greece to simply go for more austerity in order to pay their debts can't possibly work. When you make 25% of the people in a country unemployed it is hard to see how they can pay off their debts. Out of work people don't have a lot of spare cash. The only way to pay off national debts is growth. That is how Britain got on top of the huge national debt it had after the second world war. A much higher debt that Greece has now was paid down in the UK via 25 years of steady growth driven by Keynsian expansionary economics. When people are working they pay taxes instead of receiving benefits. Don't believe all the racist nonsense about no one in Greece paying tax - they do have tax dodgers but they are not in the same professional league as our own! When people are working they sell goods abroad and that brings money into the country. Some of that money can be used to slowly get on top of debt.
All the austerity that has been forced on Greece has only resulted in their debts going up not down. What they need is a co-ordinated programme of assistance to get the country working again not an ideologically driven lecture on the benefits of thrift.
At the moment we are being driven over the edge of a significant crisis point because of a panic about the moral hazard of allowing Greece to reschedule and reduce its debt burden. We are being told that we cannot possibly help Greece because every other country in trouble would then refuse to pay its debts so that they could also share in the nice experience of having their debts cancelled.
This is rubbish. Is there any nation that would wish to copy the Greek experience over recent years? No nation is going to be tempted to get themselves into a desperate debt cycle and suffer eight years of 60% youth unemployment in the hope that it will be let off the worst of its debts when they eventually got some help.
Any responsible economist would have to come to the conclusion that the safest thing to do now would be to help the Greek government to develop a package of measures that would enable their economy to grow and to get their people back out of dire poverty and into productive work. That package has to include rescheduling debts.
Unfortunately too many economists are prepared to stand up and argue for an irresponsible high risk strategy of nothing but austerity. This has no obvious gains and a massive downside. And our politicians seem just as short sighted.
When the politicians fail us so completely it is time for the ordinary citizens to challenge their orthodoxy and insist that we are all in this together. We can't let Greece go to the wall. Even if you are prepared to write off a whole nation it is massively in our own self interest to avoid this unnecessary insecurity.