Research

Katinka Barysch, of the CER, said that that realization had hit home in Germany. "It might be unpopular for the Germans and Europeans to bail out Greece, but it will be even more unpopular for them to bail out the banks that owned Greek bonds… If growth stays negative or low in Greece, the fiscal debt will continue to increase, whatever they do," Ms Barysch said, while difficult structural reforms to liberalise the economy will take time. The economists she speaks to "don't really see a solution for Greece in the longer run," she said. …Greece is functionally bankrupt, Ms Barysch said.

As Hugo Brady, an analyst with the Centre for European Reform, said this week: "The EU tried for 10 years on the basis of peer review to make structural changes to the EU economy and no one really listened… Now that simple message might get through."

Alogoskoufis and Papantoniou were joined in a panel discussion by Wim Koesters, a professor at the Ruhr University in Bochum, Germany, and Simon Tilford, chief economist at the CER. "The point really now is about the degree of default, not whether there is going to be one," Tilford said. In the long term, in the absence of a common euro-region budget policy, "then I think we will see ongoing crises and a managed dismantling of the eurozone."

"The problem here is the recurring inability in the European project to say brutal truths honestly and clearly and act on them in a realistic manner," said Hugo Brady, a senior research fellow at the CER. "The markets aren't stupid. They aren't going to be fooled by elaborate peacocking displays. They can see when reactions are credible and when they are not. Anyone could see Greece was going to need bailing out in a matter of weeks, and so that dancing around just made it worse...

"A default of some sort — or debt restructuring — is highly likely and people holding government bonds will have to agree to a haircut," says Philip Whyte, senior research fellow at the CER. "But given the alternative, that would not be the worst possible outcome, which would be for Greece to leave the eurozone, and for Greece's problems to spread to other vulnerable countries, like Spain and Portugal."

The Centre for European Reform's Tomas Valasek said that some NATO members in Central Europe could see the removal of the US gravity bombs as "a unilateral step taken by their big Western allies that puts Russia's concerns ahead of theirs ... so it will be a divisive question."

"France and Germany's stance is to extend regulation in previously unregulated entities," said Philip Whyte of the Centre for European Reform in London. "The US and UK priority is to make sure we revise the way banks are regulated."

Today Hugo Brady, one of the senior researchers at the Centre for European Reform, a wildly pro-EU think tank in Brussels, put out a fantasy history 'published in 2070' of what a 2010 coalition government of Cameron-Clegg meant for Europe… Brady goes on with fantasies of closer British-French ties on defence and common rules across the EU on corporate taxation, then a new treaty to establish a centrally-managed euro zone treasure fund equal to 3 percent of EU GDP - and on it goes, though the list of all the powers of which eurocrats dream.