06 Feb '12, 3pm
Why are the IMF, EU and ECB so keen to avoid a Greek default?
Costs for the EU, however, might well be astronomic. Containing a Greek default is one thing: the sovereign debt, though large, is manageable. Losses to banks will by now be significant, but not unbearable. The real danger, however, is that one EU member in default sparks a chain reaction. First, as other countries realise the costs are not as high as they feared. Second, as markets sniff blood and notice that Portugal, currently facing 16 per cent borrowing costs, is scarcely in a better position than Greece; or that great chunks of Spain’s immense property loans aren’t payable; or that Italy’s €1.3tr debt isn’t going away any time soon.