Floyd Norris explains why Greece’s default is inevitable:
“German officials hinted a few weeks ago that a Greek restructuring might be coming, but have since been quiet, and the German government has joined the European Central Bank and others in saying no such action is under consideration. Instead, they say, Greece should stick to its agreed plan of austerity and reduced budget deficits. The fact it is failing to meet those targets — the 2010 deficit was well above plan — is treated as inconvenient but not crucial.
Sooner or later there will be a Greek default, even if it is officially described as a “voluntary restructuring” approved by most bondholders. Europe wants to delay that at least until 2013, when new rules are supposed to kick in that would let official creditors — such as Europe’s bailout fund — do better in a deal than private creditors”
On the back burner, but not forever, and probably not for a whole lot longer, either.
Inevitability of a Default in Greece
NYT, May 5, 2011