Now that Greece and its European creditors have set the country on a perilous path into the unknown, it’s worth considering the economic damage that almost a year of political turmoil and brinkmanship has wrought. Nowhere is this clearer than with capital flight: Over the 12 months through May, at least 64 billion euros in private money has left the country -- the equivalent of more than a third of Greece's annual economic output.
Data from Greece's central bank, which records a liability for every euro that leaves the banking system, suggest that investors and depositors started pulling out in mid-2014 -- not long after the far-left Syriza party's victory in European parliamentary elections set the government on a collision course with creditors. The flight accelerated sharply in January, when a coalition led by Syriza came to power in Greece on a promise to end austerity and shed some of the country's debts.
Here's the cumulative 12-month capital flow between Greece and other euro-area countries, as a percent of 2014 Greek gross domestic product (negative numbers indicate outflows from Greece):
The flight demonstrates how much the Greek debacle has undermined the common currency. By allowing investors to entertain the possibility that one euro-area country could revert to a devalued national currency, Europe's leaders have sowed doubt about the union's future support for any member that runs into financial difficulty, eroding the economic advantages of monetary union. Even if Greece makes amends with its creditors, reopens its banks and ends capital controls, Europe will have a long way to go to restore the confidence it has squandered.
Mark Whitehouse writes editorials on global economics and finance. He was previously at the Wall Street Journal, where he covered economics in New York and served as a deputy bureau chief in London.