Any kind of default without a currency devaluation is like running out of money having just refuelled the car but then expecting it to continue running when the tank runs dry. It won’t solve the problem as there simply isn’t enough income to sustain the Greek economy even if interest payments are suspended temporarily. A currency devaluation is the mechanism by which the country attracts external demand once more so that an export-led boom results and investors steam in to snap up cheap assets.
Perhaps the idea of a controlled devaluation and temporary euro suspension will keep all parties happy, neutralise any me-too desires from other previously bailed-out countries, maintain market order and keep the Syriza government in power, ensuring political stability. A neat solution but fraught with implementation challenges. We may be about to see an historic economic experiment put into practice if the authorities have the stomach for it. More likely perhaps is another round of can kicking but this is becoming a challenged endurance sport – surely it’s time for a solution to move forward.