A Greek default is coming and the European authorities trying to avoid it will have to face up to it eventually, a leading economist told CNBC Monday.
"Eventually we will have to acknowledge that in fact there's a Greek default and take it from there," Sir Howard Davies, former director of the London School of Economics and former chairman of the Financial Services Authority, the UK banking watchdog said.
"We are dancing on the head of a pin here, in trying to pretend that the default is not a default, but it's quite clear that nobody would lend to Greece at the moment in a free market."
Greece would likely be in "selective default" even if it follows a debt rollover plan pushed by French banks, ratings agency Standard & Poor's warned on Monday.
Last week, European politicians and bankers had expressed confidence that the French plan would not trigger a default.
"It's not a huge surprise," Patrick Legland, Global Head of Research at Societe Generale, told CNBC Monday.
"S&P need to hedge themselves. We need to take into account that this French and German solution applies only for four years maturity, so it is short term relief."
"Whatever the solution is that is found, it will be for the short term, and short term the S&P rating will see this as a functional default," he added.
"There are other many question marks behind the Greek situation, such as what will growth be in Europe this year and will it be enough to allow Greece to recover? We need to have some clear continuing fiscal policy in Greece and address taxes."
After forcing through a tough 28 billion euros ($40 billion) austerity package as part of its second bail-out from the International Monetary Fund and European Central Bank (ECB), despite protests on the streets of Athens, the Greek government now has to kick-start a privatization programme and reform its tax system.
It has promised to deliver 50 billion euros in revenues through selling off state-backed industries, such as utilities, by 2015, with 5 billion euros expected by the end of this year alone.
The situation in Greece is making the creation of a Minister of Finance for the euro zone more likely, Sir Howard said.
"If you get a ministry then you get a budget and power, and some mechanism at the centre of Europe," he said.
"At the moment the market looks at what Greeks are doing and sees we are buying more but buying more for nothing, so we may need to have another solution even at the end of this crisis.
The ECB has performed well in "an increasingly difficult environment", he added.