This board had several chunky threads a while back on Greece. Greece has been saved from default by a massive bailout co-ordinated by the ECB and IMF. Notwithstanding for the last month the spread on Greek debt has been about 800 basis points (ie at crisis level). Investors are demanding an 8% premium for perceived risk not of Greek default, but of both Greece defaulting and the ECB/IMF not paying up on guarantees. Greece is in a shocking position - but just at the moment Greece is supported by a bailout and will not default, at least not quite yet. The ECB/IMF is also in a pretty shocking position. Investors seem to feel that a Greek default is more or less inevitable (when rather than if) but also doubt whether the bailout pledged will be forthcoming. Basically investors don't believe the ECB. Today the focus of the Eurozone sovereign debt crisis has switched to Ireland. Irish bonds are now at a level which is not sustainable. While Ireland has covered its bond needs until well into 2011 it is now very clear - almost as certain as anything in economics can be - that Ireland will not be able to cover its debts from mid 2011 and will need a bailout. This is almost certain, and is also a self-fulfilling prophesy. It is very hard to see what could stop this. The Wall Street Journal is forthright: With its 10-year bonds now yielding nearly 9%, it would take a Damascene conversion by investors to bring borrowing costs back to a level where Dublin could realistically return to the market. A bailout looks increasingly necessary. European Commission President Jose Manuel Barroso says the European Union is ready to help Ireland financially. But could the Irish government cut a better deal elsewhere? NOVEMBER 12, 2010 How Ireland Could Cut a Deal (article won't link). IMO a lot follows from this. Ireland has done what Greece has failed to do in tackling its fiscal deficit - but we now see it has not been enough. Greece cannot possibly win. Nor can Portugal or Spain. It was hard to prevent Greek contagion. This will be harder. One Eurozone country needing a bailout is a problem - but two is a catastrophe. Who will believe in the Eurozone? Ireland may decide to take a bailout from the IMF alone rather than the ECB/IMF - but this would be a vote of no confidence in the ECB. The Irish problem is hitting the Euro already. It is also going to hit the UK as the UK has major exposure in Ireland - and sterling must surely fall. At least it can fall (and a weaker pound right now would not be such a bad thing). The speculators will have their eye on Portugal and Spain. Arguably the Eurozone can bailout three small economies (Greece, Ireland, Portugal). But Spain cannot be bailed out as it is just too big. This is the place where Soros has predicted the euro will be boken. My personal view is that Sarkozy, Merkel the ECB are trying to keep a lid on the crisis until into next spring - but I think this now looks more of a challenge. They may have to bring forward their plans. Just a few days ago there was talk of the euro crisis having reduced. Well its back and bigger than ever. The point is IMO it cannot go away - there will be crisis after crisis until either there is a single state of the EU or the euro beaks. The G20 have just criticised the German trade surplus caused by a currency too weak for Germany. Well this is further weakening the currency. The problem is increasingly that Germany cannot stay within the eurozone. But most of all this hits Ireland and the people of Ireland. They have probably not yet woken up to just what a 2011 bailout means to each and every one. I hope the Irish government approaches the issue with more courage than I have perceived from the Greek government.