Why a Grexit Could Really Hurt the Eurozone

      There is a narrative you hear a lot now that the Greeks have 'no leverage' that with the ECB doing QE the risks of Greece defaulting or even leaving the euro is not the danger it once was.

       This was the claim of Citgroup's Steven Englander this morning, though I disagree:

     "Greece can expect its European creditors to play hard ball in negotiations over its bailout for a simple reason: the prospect of a Grexit just doesn't instill as much fear as it once did, Citigroup's Steven Englander said Monday."

      "It's undesirable, but it's not a catastrophe as it would have been in 2011, 2012," the head of Citi Global's G10 FX strategy told CNBC's"Squawk Box." "So I think that they're going to play somewhat hardball and try and get some of these reforms they actually want."

     "Greece has a very bad hand right now," he said.

     http://diaryofarepublicanhater.blogspot.com/2015/06/does-greece-have-bad-hand-in-eu.html

     Makes some sense right? However, you can argue that even if the EU itself isn't destroyed by a Grexit, it would hurt it's strongest and most powerful member, Germany,as German exporters would lose the benefit of a euro depreciated due to Greece. 

    http://www.cnbc.com/id/102769162

    How healthy will the EU be if Germany is hurt? Then there is a sense in which Greek leaving the euro could really hurt the entire euro project. If Greece leaves and there is life after the euro other weak countries may follow them

    "The first thing to know about the Greece story is that it's not really about Greece."

    "Not, at least, in the big financial picture, where the country's measly $242 billion economy is only a shade larger than Connecticut's, and where its debt, the equivalent of $360 billion, would be a rounding error of the nearly $18 trillion in U.S. obligations."

     "Why Greece and its likely debt default and possible exit from the euro zone matters is as a symbol—of how far the global community will go towards rescuing Greece from its debts, and ultimately, perhaps, for whether similarly debt-laden weak sisters in the euro zone should simply leave the union, go back to their original currencies, and simply inflate their way out of trouble."

     http://www.cnbc.com/id/102777990

     So the real danger here is not simply economic-Greece is a tiny economy-but political. Greece leaving might open a Pandora Box.