CNN Money
October 5, 2011
It was once unthinkable but is now widely expected: Greece is headed toward default.
Not if -- but when.
"A default is likely," said Wolfango Piccoli, director of the London office of the Eurasia Group. "At this stage, the question is about the timing."
The timing is important because European authorities are scrambling to build a "firewall" that will protect banks and other euro area nations from the fallout of a Greek default.
The first step is to overhaul an existing bailout fund for Europe, which is expected to be officially approved by all 17 eurozone nations by the end of October.
The goal, analysts say, is to create conditions for Greece to default in an organized way, rather than an abrupt collapse that could cause chaos in global financial markets.
Euro area officials have said repeatedly that Greece will meet its obligations and avoid a default. Yet the inevitability of a Greek default has become conventional wisdom in financial circles.
"The debt level of Greece is not sustainable," said Farid Abolfathi, senior director of the Risk Center at IHS Global. "No matter how much austerity, they will not be able to pay their creditors. At some point in time, they are going to default."
The argument is that Greece owes more money than it can realistically repay, considering that its economy has been in recession for years and is not expected to turn around any time soon.
For the past 15 months, Greece has been kept afloat by billions of euros in bailout money from the International Monetary Fund and its European "partners."
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