No Bailout for Greece? Don't Bet on It

Patrick Allen, |CNBC Senior News Editor

The euro is under pressure after ECB board member Juergen Stark told Italian daily Il Sole 24 Ore that investors are "deluding themselves when they think at a certain point the other EU member states will put their hands in their wallets and save Greece."

Over the next 3 days, Greek officials in Athens will play host to European Union and European Central Bank officials who are likely to call for further measures to bring its huge budget deficit under control.

On Tuesday, the Greek Finance Ministry said it would accelerate reforms in a bid get the gap under control by 2012, a year earlier than originally planned.

But, of course, it remains to be seen if there is really a credible plan to do this, given Greece's previous resistance to both raising taxes and cutting the countries generous social security system.

Speaking on European Squawk Box, Diego Iscaro from IHS Global Insight says he believes Greece will not be allowed to fail given the impact it would have on other euro zone members like Spain, Ireland and Portugal.

Diego believes the country's civil service will react badly to any cuts and could strike, leaving the government between "a rock and a hard place."

Jane Foley, the director of research at, looked at forecasts from the Greek government - which aims to cut the deficit from more than 12 percent of GDP to below 3 percent - and thought "no way."

It is too soon to talk about ejecting Greece from the euro zone, according to Foley. But she thinks there will be trouble ahead, given the Greek electorate will be very unlikely to back any austerity measures. If nothing is done over the next 3 or 4 years then it could be a "different matter."

Spreads on Greek bonds over the German benchmark have narrowed but remain 200 basis points higher than the bund.

After their debt was downgraded by all the major credit ratings agencies in December, investors have begun wondering whether the ECB or Germany would come to the rescue of the Greeks who have for years overspent and even been heavily criticized for manipulating economic data.

As a euro zone member, Greece has not been able to devalue its way to competitiveness and is now paying the price for failing to address structural issues in its economy that have steadily made it less competitive as an exporter and tourist destination.