A debt default by Greece is inevitable. It may be more about how and when the default is engineered, in large part in coordination with Greece’s EU partners. However, the danger may be in prolonging the solution, European leaders make the problem worse, or at least extend uncertainty for the entire Eurozone, perhaps all of EU thus costing each economy higher borrowing cost, lower investment inflows and a sluggish growth rate. Why is it Default Under Any Name: • European leaders have called for private investors holding Greek debt to agree to a “voluntary rescheduling.” However, under the terms of the “ratings” provided by S&P, Moody’s and Duff & Phelps, this is a default voluntary or not. Any amount of flowers sent to the debt holders, and no matter how many times the bondholders say “yes,” it is nonetheless a violation of the underlying bond instrument. • If Greece’s Papandreou led Government does not adopt the “austerity measures” demanded of it by EU/EMU/IMF leaders, then it will not get the loan installments or further loans to avoid default, (and agreement to voluntary restructuring by private investors may be a pre-condition – thus a default may be a precondition to avoid a default anyway). • If Greece does adopt the “austerity measures” demanded, it is likely to fall dramatically in terms of economic activity and will not be able to meet the loan terms required or to secure needed tax revenues in the future. The fundamental problem is that the Euro is more of a straight jacket than remedy for Greece even as it may be the backbone of economic stability and prosperity for much of the remainder of the Eurozone. (See our previous ARTICLE – “Death of the Euro?” - diplomaticallyincorrect.org/films/blog_post/death-of-the-euro-by-ambassador-mo/29753 Putting of Default May be Making it Worse, Now & Then? Political leaders have the tendency to believe and act as if control and delay is better than now and events running their course. The problem is that EU leaders cannot redefine a “default” in a financial instrument regardless of what they call it. They cannot control what thousands of professional bankers/investors perceive, except that the longer that it takes, the more uncertainty is perpetuated, perhaps increased over the time of “delay” while an orderly (more controlled) solution is presumably sought. During that period borrowing costs go up, investments are held up and the problem could cumulate in Greece like a flood behind a dam without ultimately will or capacity to hold the water from breaking through. Politicians become accustomed to a frame of reference that their bullshit has no cost, but only potential rewards in votes and/or campaign contributions. However, there is no free ride in financial travels – a taxi constantly running the meter. In the hierarchical pyramid of free market economies, financiers and bankers are above politicians in the food chain. The last paragraph is lagniappe. The bottom line, delays in keeping Greece from default delays resolution and further undermines the Euro (PHOTO from ECB) and the EU. Whether divorce or gentle separation at least for the moment, Greece and the Euro must go in separate directions. There is nothing worse than a bad relationship perpetuated except perhaps a marriage solely maintained because of image. Related Reports at “International Financial Crisis Channel” - diplomaticallyincorrect.org/c/international-financial-crisis By Ambassador Muhamed Sacirbey Facebook – Become a Fan at “Diplomatically Incorrect” Twitter – Follow us at DiplomaticallyX