Greek Fire, Part 40

And the Greek Fire may now be ready to burn all of Europe.  Bloomberg:

European Central Bank council member Ewald Nowotny suggested the bank may compromise and allow a temporary Greek default as officials scramble to fix a sovereign debt crisis that’s spreading to Italy and Spain before a leaders’ summit in two days. 

Pause.  Rewind.

and allow a temporary Greek default  

Well now.  That explodey sound you just heard was what was left of the Greek short term bond market cratering.

In the CNBC interview broadcast this morning, Nowotny said there’s “a full range of options and definitions, from a clear- cut default, selective default, credit event and so on.”

“This has to be studied in a very serious way,” he said. “There are some proposals that deal with a very short-lived selective default situation that will not have major negative consequences.” 

Not have major negative consequences?   Surely we forget what happened to credit markets are Lehman went under.  The same thing is bound to happen here.  That Thursday ECB meeting could be very, very interesting.

Kevin Drum sums it up:

This is not, repeat not, a good time to be screwing around with the possibility of defaulting on U.S. debt. Repeat: not, not, not. It's time for the Republican leadership to start facing reality and getting their troops in line. Play time is over.

This week could be very, very important to the world financial picture, folks.