TYLER COWEN sent out a tweet this morning:

I would like to see a time plot of when various economists announce that leaving the Euro is a) OK, b) desirable, and c) necessary.

Opinion on the irreversibility of the decision to join the euro zone was established, among many economists, by Barry Eichengreen, who argued back in 2007:

The insurmountable obstacle to exit is neither economic nor political, then, but procedural. Reintroducing the national currency would require essentially all contracts – including those governing wages, bank deposits, bonds, mortgages, taxes, and most everything else – to be redenominated in the domestic currency. The legislature could pass a law requiring banks, firms, households and governments to redenominate their contracts in this manner. But in a democracy this decision would have to be preceded by very extensive discussion. And for it to be executed smoothly, it would have to be accompanied by detailed planning... The very motivation for leaving would be to change the parity. And pressure from other member states would be ineffective by definition. Market participants would be aware of this fact. Households and firms anticipating that domestic deposits would be redenominated into the lira, which would then lose value against the euro, would shift their deposits to other euro-area banks. A system-wide bank run would follow. Investors anticipating that their claims on the Italian government would be redenominated into lira would shift into claims on other euro-area governments, leading to a bond-market crisis. If the precipitating factor was parliamentary debate over abandoning the lira, it would be unlikely that the ECB would provide extensive lender-of-last-resort support. And if the government was already in a weak fiscal position, it would not be able to borrow to bail out the banks and buy back its debt. This would be the mother of all financial crises.

But today, Paul Krugman says he's re-evaluating whether this argument is relevant in the Greek situation:

[T]he Eichengreen argument is a reason not to plan on leaving the euro — but what if the bank runs and financial crisis happen anyway? In that case the marginal cost of leaving falls dramatically, and in fact the decision may effectively be taken out of policymakers' hands. Actually, Argentina's departure from the convertibility law had some of that aspect. A deliberate decision to change the law would have triggered a banking crisis; but by 2001 a banking crisis was already in full swing, as were emergency restrictions on bank withdrawals. So the infeasible became feasible. Think of it this way: the Greek government cannot announce a policy of leaving the euro — and I'm sure it has no intention of doing that. But at this point it's all too easy to imagine a default on debt, triggering a crisis of confidence, which forces the government to impose a banking holiday — and at that point the logic of hanging on to the common currency come hell or high water becomes a lot less compelling.

This seems reasonable, but I think we run into trouble when we hit Mr Krugman's next paragraph:

And if Greece is in effect forced out of the euro, what happens to other shaky members?

That's the rub. Bank runs and crisis in Greece simply aren't enough to threaten the European or global financial system. Total foreign exposure to Greek debt is a little over €200 billion. But a Greek exit from the euro zone would inevitably lead to concern that similar departures might be in store for other troubled nations. And a run on Spanish and Italian banks is a much, much bigger deal. Debt exposure moves from the hundreds of billions to the trillions of euros. Suddenly things look very bad.

The trouble is that Mr Krugman is right: from the Greek perspective a euro departure begins making a lot of sense. If you're going to be saddled with the bank runs and crisis, you may as well get devaluation to go with it. I'm not sure that over the long-term life outside the euro will be better for Greece (and it's hard to imagine them ever getting back in), but politicians tend not to make decisions based on the long-term. So what do you do when Greece indicates that maybe it wants to leave the euro (particularly when a lot of Germans would be happy to see them go, damn the consequences).

I think it's important to make Greece a generous enough offer that departure seems like the less palatable choice. And that leads toward the necessary adjustements in Europe's fiscal institutions; there must be more scope for transfers across the euro zone if the currency area is to stay together.