James Saft is a Reuters columnist. The opinions expressed are his own.
Greece, Germany and the European Central Bank appear to be petitioning for a divorce, not from each other, yet, but from reality, citing irreconcilable differences.
As in all such divorces, reality will get by far the best end of the settlement and it will be the children, or should that be the citizens, who suffer.
Greece, shut out of the capital markets, needs money, and soon, and is willing to play along with the fiction that the next tranche of aid, perhaps 90 billion euros, from the European Union, International Monetary Fund and ECB will buy them enough time.
The ECB, which is up to its eyeballs in exposure to Greek debt, steadfastly maintains that it won’t countenance a soft restructuring, or default, presumably because it fears this will be too much for it, the banks, and the global financial markets to bear.
Germany, however, is insisting on just that; it maintains that the private sector will have to bear some of the costs, and while there is much discussion about “soft” restructurings featuring debt repayment extensions, no one has credibly explained how the private sector can take its lumps without it being considered a default.