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Greek default is just a matter of time
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"A default is likely," said Wolfango Piccoli, director of the London office of the Eurasia Group. "At this stage, the question is about the timing."
The timing is important because European authorities are scrambling to build a "firewall" that will protect banks and other euro area nations from the fallout of a Greek default.
The first step is to overhaul an existing bailout fund for Europe, which is expected to be officially approved by all 17 eurozone nations by the end of October.
The goal, analysts say, is to create conditions for Greece to default in an organized way, rather than an abrupt collapse that could cause chaos in global financial markets.
Euro area officials have said repeatedly that Greece will meet its obligations and avoid a default. Yet the inevitability of a Greek default has become conventional wisdom in financial circles.
"The debt level of Greece is not sustainable," said Farid Abolfathi, senior director of the Risk Center at IHS Global. "No matter how much austerity, they will not be able to pay their creditors. At some point in time, they are going to default."
The argument is that Greece owes more money than it can realistically repay, considering that its economy has been in recession for years and is not expected to turn around any time soon.
For the past 15 months, Greece has been kept afloat by billions of euros in bailout money from the International Monetary Fund and its European "partners."
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But the nation has had limited success when it comes to enacting the painful reforms necessary to bring down its budget deficits, and has yet to begin the process of restructuring its bloated public sector.
The Greek government disclosed over the weekend that it will not meet its budget goals this year and next, citing a worse-than-expected economic environment.
The shortfall, while not a surprise, has complicated the politically fraught negotiations over the latest €8 billion installment of emergency funding for Greece from last year's €110 billion bailout.
For one thing, the nations providing the bailout money are having a hard time convincing taxpayers that supporting Greece is absolutely necessary. There is limited political appetite in places like Germany, Austria and Finland for an open-ended commitment to a nation that did not manage its finances very well.
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