The euro zone can no longer afford to save Greece.
On the contrary, it needs to eject Greece now to save itself given the increasingly parlous state of many of its other economies.
The time is swiftly coming where a second bailout, much less a third or fourth, for Athens will simply be too damaging to the rest of the currency union.
Until now, euro-zone leaders were quite happy to let negotiations for a new €130 billion package for Greece drag on.
The hope probably was that either Greece would decide to leave the euro zone of its own accord or that extra time would provide more opportunity to build a firewall to protect other much larger peripheral debtors from contagion.
To a certain extent, the latter has proved true. As the rescue package has slowly been put together, the cost of financing for most other peripherals may remain high but at least they have stabilized.
And, this has helped most of them to secure additional market funding without too much difficulty.
But two things have happened this week that are going to make the life of these peripherals as well as the life of euro-zone leaders considerably more difficult and the leaders much less disposed to spend their time and money trying to save Greece.
On Monday, Moody’s downgraded six euro-zone countries in recognition of the economic problems that will persist even if the Greek debt crisis subsides.
This will hardly encourage investor interest just when many of these countries need their support.
And, new growth figures on Wednesday confirmed what many have feared, that economic conditions in some euro-zone member countries, particularly Italy and Spain, have continued to deteriorate, making their ability to service their debt in the future even more difficult.
Even the German economy has now started to contract. And the Netherlands, which is normally closely aligned to Germany, reported a shocking 0.7% decline in the fourth quarter.
France may have brought some good news with an unexpected 0.2% expansion but even this doesn’t stand up to scrutiny with analysts pointing out that consumer spending and net trade remain in negative territory.
This poor economic picture is likely to focus the minds of euro-zone leaders even more acutely on how to end the uncertainty over Greece and start to provide more financial backup for countries such as Italy and Spain to prevent some new conflagration in European markets.
Reports that Germany, the Netherlands and Finland are losing patience with Greece and that Eurogroup finance ministers were prepared to postpone a meeting scheduled for Wednesday while they get written commitments from Greek politicians ahead of elections in April have only increased tensions.
As the deadline for the bailout and the next Greek repayment installment gets closer, there is a growing impression that euro-zone leaders might well be prepared to take the risk of a Greek default, test the firewall against contagion and turn their increasingly limited resources to preventing the crisis from spreading to Italy and Spain.
