The longer the attempts to avoid Greece defaulting on its debt, the worse the situation gets for everyone. As the fear ramps up, and pushes the borrowing rates higher and higher, the more likely it becomes that Governments will be cowed into handing over large chunks of money (that they don’t have). All to save a banking / financial system that has very few national ties (multinationals), pays very little tax, and is working as hard as it canto profit from the instability that it has created.
It seems critical to me that the EU (with or without the UK) forces through legislation to separate investment and retail banking. Without that separation the banks can continue to hold the threat of bank runs over the heads of states, and continue to shake them down.
Greece, and maybe some of the remains PIIS (see what i did there?), must be allowed to default. Investors must take loses on bad loans, not a fraction, but lose their shirts. Unfortunately that would bankrupt the banks casino divisions, and because of the way that the banks are now structured, lose the average citizen their savings.
Maybe the Governments should save their money, let the banks fail, and revive them under new legislation that separates the businesses? State capital would only be put into retail banking, making good on the guarantees to citizens that their money is safe.
Obviously there is a lot of robbing Peter to pay Paul involved in this scheme (the states are playing with money saved (ha!) / borrowed against future taxation, but the cost of not ending the shakedown is likely to be higher in the long run.
We are in a situation where loans are bad, and pretending that they can ever be paid off is a fantasy. The Japanese solution to this problem was to turn the banks into zombies, that wrote off a portion of the debt every year. That doesn’t seem possible in the EU (the markets are too open to allow it?) and therefore the debt must be cancelled / defaulted on. It’s going to hurt. A lot. But it still might be worth it just to break the banking systems chokehold.