Jan Lambregts, Rabobank's Global Head of Financial Markets Research, discusses the economic incentives for weak and strong eurozone countries to stay together in the euro.

The financial crisis isn't dead. It is alive and kicking in the European bond markets where different countries are pushing the limits of what market players will accept. European policymakers will eventually have to enlarge their support fund considerably. It's a politically sensitive undertaking that will be played out on the cutting edge. With only a very small margin of error.

It's no wonder some people are speaking openly about breaking up the eurozone. But how realistic is this scenario? It is a tricky topic that can best be approached via a simple question. Why would the weak and strong eurozone countries ultimately want to stay together? The euro project is backed by strong political will – a factor that is underestimated and difficult to quantify. I will limit myself to discussing the related economic incentives.

Greece no stranger to financial crisis

Let's start with the weak countries. There are frequent calls for Greece to reintroduce the drachma. These voices claim massive depreciation of the Greek currency would bring about both welcome inflation and an export-led recovery. It's a dangerous idea.

According to this scenario, Greece would be left with a mountain of debt in euros that would have to be repaid in hugely depreciated drachmas. Making capital flight a very real risk, which would wreak havoc on the Greek banking sector. An export-driven economic recovery is also unlikely, due to Greece's lack of a large export industry.

So the benefits of a weaker currency are minimal. While a limited increase in inflation would reduce real debts, it would come at the expense of savers. It is, however, naive to think inflation would remain limited in this scenario. Hyperinflation and all the related disastrous effects would be much more likely.

Supporters of Greece breaking away from the eurozone often conveniently forget that the return of a weak drachma would place upward pressure on Greek interest rates. I can hear you thinking: Aren't Greece's interest rates already sky-high? Well, not by Greek standards.

The Greek 3-month money market interest rate rose to above 120% in May 1994. So Greece is no stranger to financial crises and it clearly didn't need the euro for economic turmoil. Greece's best option is consequently to stay the distance with the IMF, the ECB and the EU. Benevolent neighbouring countries' support combined with painful reform measures and ultimately partial debt restructuring seems to be the best solution for the country.

Germany wants level playing field

Sounds great, but why would the strong eurozone countries want to participate in this? Wouldn't it be better for Germany to leave the negotiating table and reintroduce the German mark?

We think it is in Germany's own interest to remain in the eurozone and to help finance support programmes. German banks are already heavily exposed to eurozone periphery government bonds. An orderly settlement of this debt crisis is the least expensive option for German taxpayers.

Plus the European debt crisis is keeping the value of the euro lower than it would be otherwise. It's a development that the ultra efficient and competitive German export industry can use to their full benefit. If Germans want to reintroduce the mark, it would be much stronger.

In the past Germany specifically wanted to involve the weaker countries in the euro project in order to create a level playing field. This continues to be an important aim. While it must not come at the expense of everything, it is a factor that should not be overlooked.

The European debt crisis is not over. The solutions might not be perfect. Even so, there are strong incentives for both weak and strong countries to stick with the euro project in order to serve their own interests.

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