Greece officially enters death spiral territory as price of bond insurance soars

Just when you thought Europe could not go any further, Greece announces that it is on a death spiral.  If that is the case, they would be wise to get their default done sooner rather than later.  And when they do default, Germany would be wise just to let it happen. 

Why does being in the Eurozone imply a protection against default.  I have never been able to figure that one out.  For me it just a backhanded way for Germany and France to prop up their banks which had been binging on Greek debt for some time prior to the financial crisis. 

Drowning in red ink, Greece has nowhere to turn to revive the economic growth that might put its debt on a sustainable trajectory, reassure angry foreign creditors and offer hope to its recession-weary citizens.

Instead, the country finds itself in a vicious circle—a death spiral, some would say—in which it is borrowing ever more to keep up on its existing debts, crushing growth in the process and thereby worsening its all-important ratio of debt-to-gross domestic product.

Springing the debt trap would not be a miracle cure either: a manageable level of borrowing is a necessary but not a sufficient condition for Greece to start restoring competitiveness and resume growth after three years of economic contraction.
See the Greek spreads over German and the German CDS spreads below.  It is not getting any better.  In fact, the longer they play this bailout game, the less confidence foreign investors have in their bonds. 

Current Greek Spreads over German Bonds

Current Greek CDS Spreads


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