Greece is insolvent. No austerity or new taxes will pay its debts.
Like a homeowner owing four times income, belt tightening and a longer repayment period are not enough. Either, the house is sold to clear the debt, or the bank takes back the house.
Greek bondholders don't have that choice-they can't repossess the Parthenon.
Greece is a sovereign country, and either it will be the recipient of endless German largess-an unlikely scenario-or European creditors, banks among them, will take a loss.
Now, the International Monetary Fund bluntly warns Spain, to avoid becoming the next Greece, it must radically overhaul labor laws, pensions and consolidate banks-that's tough for a sovereign that doesn't print money in the midst of a market panic.
Germany and European banks can't take that hit.
The next financial Tsunami is emerging and will ripple to America, just as our mortgage debacle gave Europe fits.
Liberals on Capitol Hill and the New York Times interpret this to mean Europe needs to toughen up on tax scofflaws and fine tune Euro socialism.