Cage Match: Greece vs. Germany

It's the proverbial 110 lb weakling versus the heavyweight champion of the world. And what looks like a horrible mismatch is actually a pretty even battle. This is true because the little guy may go down, but if he does, he's going to take the big guy with him. Felix Salmon: Up until now, the EU's attitude to Greece was a bit like Tim Geithner's attitude to the debt ceiling: Greece will implement the reforms it has promised, it will recover economically, we will give them the liquidity they need from the EFSF, there is no alternative. But now, starkly, two alternatives have emerged blinking into the harsh light of the market. Either Greece defaults and remains in the euro; or it defaults and leaves the euro. This is not an orderly London Club bail-in default with a modest 21% haircut and an exit yield of 9%: rather, it's a proper we-can't-pay-our-debts default with significant losses for all banks holding Greek debt - including the ECB. Meanwhile, with the exit of Jürgen Stark, the...(Read Full Post)