January 24, 2012
The euro zone is inching closer to breaking its long-held taboo against a Greek default, but can still escape financial market mayhem and a body blow to the euro.
It all comes down to whether the default is controlled or chaotic.
Officials have been talking to private bondholders for nearly seven months to get them to share the burden of a second international bailout of Greece with taxpayers, who have so far shouldered all the cost.
But there is still no result, and the threat of a forced default - something that politicians have long been adamant must never happen - drew closer on Monday, when euro zone finance ministers rejected what the banks had billed as their final offer.
Last year, the very prospect filled policymakers with dread but sentiment has changed a little.
Bond markets have thus far exhibited little sense of panic at the slow progress towards a deal, while the European Central Bank wiped out fears over a bank collapse by pumping massive amounts of cash to fund banks into the system in December, an offer it will repeat next month.
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