The only leverage Athens has is to default and go back to the drachma.

There’s no possibility that Greece will be able to meet its debt obligations with an economy being bled dry by the Germans and a lack of competitiveness.

A currency devaluation of 75% will give some hope to Greek workers: see Argentina and Iceland.

Short-term (not decades long) pain will bring with it long-term gain.

And the Germans at long last will be forced to abandon from their utterly amoral, stupid and unnecessary austerity morality fetish.

Gorilla says: “In the name of Socrates, GO!”

The Germans and French remain deeply unserious about solving the sovereign debt problem.

What’s needed is a simple statement: “The ECB will be the lender of last resort and will buy sovereign debt in unlimited amounts until an acceptable interest rate floor is achieved”.

Instead, we get more austerity nonsense, more puritans v. sinners, and the kind of stupidity only previously achieved at international level by various authoritarian states and the Know Nothing Party.

Gorilla says: “KozyMer’s a dozy mare!”

And it’s do or die now for Euroland, the Germans can’t keep ignoring reality…

The “crisis” could be over in 5 minutes, with a statement from the ECB backing sovereign debt and a price floor.

Gorilla says: “Merkel is getting her vicious circle!”

And it’s the first stage in what will be the breakup of the Eurozone.

The Greeks have no capacity to pay off their debts, regardless of the size of the haircuts Germany negotiates.

The choice for Greeks is between decades of social unrest and the chance, like Iceland and Argentina, to regain independence and genuine economic growth. It won’t be easy, but default and a return to the drachma is clearly the better choice.

The Germans, on the other hand, refuse to face reality. Their banks are largely bust, their Chancellor is a liar, and their fetish about non-existent inflation threatens to bring down the Euro for good.

Gorilla says: “Democracy always gets in the way of entrenched, corrupt elites!”

An inflation target at or below 2% means crippling deflation and a larger debt burden for the PIIGS. No cuts in interest rates mean borrowing costs will increase, not decrease.

Gorilla says: “The Germans need to face reality, but all they want is fantasy!”

There’s just no coherent leadership in Euroland at the moment. Markets have already priced in Greek default, but are much more worried about Italy and Spain.

What’s needed is a clear statement from the ECB that it will be the lender of last resort, coupled with large scale purchases of Italian and Spanish bonds, recapitalization of European banks, and an immediate reduction in interest rates.

None of these things will please the Germans, who have been misled repeatedly by their Chancellor. Unless there’s some genuine honesty forthcoming, the Eurozone will be finished within weeks.

Gorilla says: “Lying in the service of a lofty dream doesn’t make that dream any more workable!”

Paul Krugman thinks there’s a 50/50 chance of a global recession.

Gorilla now thinks there’s a greater chance that the Eurozone collapses.

The Germans are pursuing incredibly stupid policies.

All of the austerity regimes for Club Med have succeeded in a rare trifecta of idiocy:

1) Growth is slowing down.

2) Default risks are now higher, because of slower growth.

3) Debt levels therefore increase, despite austerity, and the downward death spiral for Euroland and its banks goes on.

The British too are also pursuing the same stupidity.

The US is pretending to stimulate, but there’s political gridlock in store until 2012, so it’ll be up to Helicopter Ben to save America.

Gorilla says: “So many dumb ideas being pursued simultaneously by so many dumb leaders, is it any wonder we’re in such a mess?”

Well, yes, primarily because Chancellor Merkel has been lying for months about the German banking system, which is desperately in need of recapitalization.

And yes, German taxpayers also will have to foot the bills for Club Med’s borrowings from German (and French and Dutch) banks.

The alternative, allowing Euroland to break up, will have the same impact on the banking system, so it’s really a choice between pay now and pay later.

Gorilla says: “Easy money is getting harder to find!”

The definition of a lying, cowardly Eurozone leader, Chancellor Merkel is now stuck between her domestic audience (who are opposed to endless bailouts of Club Med) and the international markets (who want to see Eurobonds and a commitment approaching $2 trillion to back Club Med debt).

The Chancellor wants to have it both ways, doing nothing much further to help the periphery and refusing to contemplate closer monetary and fiscal union. It’s a recipe for disaster and is completely unsustainable.

Gorilla says: “It may not be Tripoli, but the Merkel regime is not long for this world!”

It may one day well be about better political and fiscal integration across the continent, but right now it’s about $2 trillion or more of debts undertaken by a failing banking system and a one size fits none monetary policy.

What’s needed is a clear statement that the ECB will be the lender of last resort should the contagion continue.

What’s also needed is a willingness to raise the inflation target to at least 4-5%.

What’s also needed is a mechanism to allow the PIIGS to leave the Euro.

What’s also needed is an end to the idiotic austerity program that only guarantees slower growth and greater debt.

What’s also needed is a large scale stimulus program, perhaps financed by Euro bonds, that would put people back to work in Club Med.

What’s finally needed are political leaders who don’t engage in blatant lying to their own citizens about the real state of Euroland.

Gorilla says: “Another pretend summit with pretend solutions that fools absolutely no one!!!”