Just the talk of a Greek departure has engendered signs of such strains. To be sure, Spanish bonds have sold well recently, pushing their yields down enough to offer Madrid some relief. But that improvement hinges entirely on European Central Bank President Mario Draghi's promise to buy large volumes of Spanish debt if necessary. Otherwise, concerns for the future of the euro have driven funds away from Europe's troubled periphery into Germany and other stronger economies, so thoroughly, in fact, that German interest rates have at times dropped into negative territory. The fears have reduced cross-border interbank transactions so that in June, the most recent month for which data are available, they ran at their lowest level since the 2008-2009 financial crisis. Several European banks have loosened their ties to their own subsidiaries in periphery countries. Germany's Commerzbank and Deutsche Bank have ordered their Spanish and Italian branches to borrow from the ECB rather than rely on funds from headquarters. European oil giant Shell has stated bluntly that it hesitates to invest funds in Europe in any way.

Should such fears spread, as they almost certainly would after a Greek expulsion, Europe could expect to face economic and financial pains comparable to those suffered in the United States during the subprime crisis. Though fear of currency depreciation was not a factor in the American experience, default was, along with concerns about whether counterparties could meet their obligations. The reluctance of financial institutions to advance credit in such an uncertain environment, even to each other, caused interbank lending rates to soar, despite the Federal Reserve's commitment to keep its benchmark federal funds rate near zero. The ensuing loss of liquidity widened credit spreads and forced asset prices to fall faster and farther than they otherwise would have, deepening and prolonging the recession and significantly slowing the pace of the subsequent recovery.

If Europe, which is already in recession, wants to avoid such a fate, then one way or another it must convince investors and bankers that the euro is not in jeopardy. Finding a way to keep Greece in the currency union is the easiest way to do that, which, no doubt, is why all have worked so hard to support Greece during these last two-plus years of crisis and why expulsion, for all the tough talk, is less likely than accommodation and compromise. To be sure, Berlin will try to get the best deal it can. It will continue to insist on safeguards and to demand that Athens correct its budget problems at the same time it retools its economy. Athens may choose to go its own way. Politics, never wholly rational, may yet force the eurozone into draconian, if self-destructive, action. But if the politicians pause for even the most cursory review of costs and benefits, an expulsion of Greece looks a lot less likely than compromise.

For more articles by Milton Ezrati about Europe's debt crisis, see Berlin's Limited Options and Where Is Blücher? For recent news coverage, see Merkel, Monti Lead Diplomatic Push and Weidmann Resignation Report Fuels Tension.