What if Cyprus said no?

What if the small island-nation decided to repudiate the terms of the 10 billion-euro ($12.8 billion) bailout handed down by European leaders on Monday, bid "auf Wiedersehen" to the euro and the 16 other countries that share it, and become a free agent? What if, as U.K. member of the European Parliament Daniel Hannan wrote in the U.K.'s Telegraph this week, "Cyprus were to default, decouple, devalue -- and then prosper? What effect would a successful return to the Cyprus Pound have on the rest of the euro zone?"

Little, if any, in the short run. Cyprus accounts for less than 0.2 percent of euro-zone gross domestic product. It could be cut loose without any macroeconomic impact. European savers were unfazed by the initial rescue package's proposed tax on insured bank deposits: Bank runs in other countries never materialized. Even the financial-market reaction to the Cypriot parliament's March 19 rejection of that plan turned out to be a non-event. Perhaps officials in Brussels saw the response as a sign that Cyprus could be treated differently without any adverse consequences.

Over the longer term, an escape by Cyprus would signal the beginning of the end of a dream that was decades in the making: a United States of Europe. Other uncompetitive countries would see exiting as a viable option, a way of unshackling their economies from the chains of a single currency and policies more suited to, and determined by, the northern countries. (Although theMaastricht Treaty provides no mechanism for leaving the euro, a country's refusal to comply with bailout terms would probably be a de facto deal-breaker.)

David Fuller's view I will continue to say, if the Europeans want their euro, good luck to them and I hope they succeed. However, the development and implementation of Eurozone policy has always been problematical, to put it kindly.

I sympathise with the laudable objective of Euroland's founders, which was mainly to end centuries of warfare between various European countries. However, people can also evolve into a peaceful coexistence, if only because modern warfare is capable of wiping everyone out. Unfortunately, Euroland's more recent travails have revived some of the region's old enmities.

The economic planning behind Euroland looked like an afterthought from the beginning. It could hardly have been worse but it is getting better, belatedly, on a somewhat masochistic 'needs must' basis.

Fortunately, in Mario Draghi Europe currently has a very skilful leader at the European Central Bank. Dutch Finance Minister Jeroen Dijsselbloem, who also now heads the Eurozone finance ministers, sounds like a good choice. Consequently, the Eurozone appears to be better organised today than at any time in its chaotic history.

Unfortunately, Europe's perennial problem of slow GDP growth and high unemployment in the peripheral states remains. There is no quick or easy solution to this challenge. Nevertheless, I maintain that the Eurozone will continue to survive, provided that the majority of states remain committed to its existence. However, I have never assumed that Euroland was an alliance that countries could join but never leave.