Bloomberg: Europe has “a Grexit scenario prepared in detail”

(Bloomberg) - European leaders talked openly about a Greek exit from the euro ahead of a weekend summit on the country’s economic future, breaking dramatically with years of denial about the possibility.

The continent’s most indebted country is closer than ever to being forced to abandon the euro.

Greece’s banks are almost out of cash and its economy is grinding to a halt after Prime Minister Alexis Tsipras imposed capital controls to stem withdrawals, and could collapse entirely without a new lifeline from the European Central Bank.   In that event, Greece would be forced to issue IOUs or some other medium of exchange, leading gradually to the creation of a parallel currency.

Europe has “a Grexit scenario prepared in detail,” European Commission President Jean-Claude Juncker said lateTuesday night.

“The Greek people didn’t deliver a mandate for rupture; they reinforced the mandate for a lasting and just solution,” Tsipras told the European Parliament. “My country was turned into a laboratory experiment of austerity. We have to admit that the experiment failed.”

European law treats the euro as “irrevocable” and makes no provision for a country to leave or be pushed out.