Torschlusspanik: Noun. “The fear that time is running out to act, specifically in regards to a border closing. Literally, “gate-shut panic” — the feeling that medieval peasants had when the castle gates were closing for an upcoming onslaught by enemies.”

In economics this German term is most closely associated with financial crises. Charles Kindleberger used it to describe the situation when investors (or speculators as the case may be) realize that there isn’t enough liquidity to cover all the assets that they hold and all rush for the door (to cash out) at once. I don’t have to tell you that the result can be pretty gruesome when everyone tries to squeeze out at once.

The current issue of The Economist features a cover story about the possible collapse of the Euro and it made me think about Torschlusspanik. The Euro was designed to make Torschlusspanik impossible by simply having no gate. There are requirements to get into the Euro zone, but no procedure to exit. No way out. Hence no gate shut panic. Simply unthinkable.

But now it is thinkable. In a recent poll of top economics bloggers, my answer to the question of whether the Euro would exist in five years (in some form) was still “Yes,” but I said that there was a 40% chance that one of more countries would drop out. Forty percent may be a bit high (I wonder what odds The Economist would give?) but it indicates that I am now willing to think the unthinkable.

So what happens if Greece or another country leaves the Euro zone? I am starting to think that it will be a Torschlusspanik as every country with any doubts at all about the future rushes for the door. Weak countries that stay behind will certainly be subject to intense pressures both economic and political. And I am not sure that the terms and conditions to leave will become any better. Better find the door … quick.

Where would a Euro Torschlusspanik lead? I wonder.

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Apparently Torschlusspanik has an anthem!