Greece is going to default. It is absolutely inconceivable that it is able to cut spending and raise taxes sufficiently to give confidence to lenders that it can service more debt.
The likelihood that German or French governments will make their taxpayers prop up the Greek profligacy is low, with Angela Merkel simply trying to bluff her way into ensuring there should be confidence in Greece. Finally, the Free Democrats in Germany have started talking about alternatives to bailouts - whilst the CDU/CSU remains wedded to bailouts and the parties of the left can't think outside the box of European solidarity.
Greece will default, it may leave the Eurozone (as other Euro states fear contagion of the Greek effect), and will face a painful few years as its public sector is shrunk, its economy shrinks, lots will be out of work, then it will export, tourists will come and it will start to grow a real economy.
Allister Heath at City AM is blunter:
EUROPE is in a phoney war. The establishment is still in a denial about the inevitability of a Greek default; the markets don’t believe the politicians. The result is ever higher yields on Club Med debt, growing fears, extreme volatility in the pricing of banks’ securities, tensions in the money markets and a constant and destructive war of words. This chaos, and the dramatically lower share prices of many financial stocks demonstrates the uselessness and idiocy of the short-selling ban in parts of the Eurozone. It achieved absolutely nothing at all. The Eurozone needs to learn that grand gestures and propaganda don’t work. It should listen instead to the former president of the Argentinean central bank, Mario Blejer, who took over in the then devastated country in 2001 after its $95bn default. He thinks Greece, if it ever wants to salvage its economy, “should default and default big. You can’t jump over a chasm in two steps.” Argentina’s GDP collapsed by 10.9 per cent in 2002 before bouncing dramatically back.
A Greek default will be cataclysmic – but attempting to delay the inevitable threatens an even greater catastrophe.