I’ll spare you the long version I just typed up and erased, but I did want to say that the likelihood of Greece defaulting isn’t related to the likelihood of Italy defaulting. I do expect some sort of effort by Greece to voluntarily restructure some short term debt into longer duration bonds. Depending on the terms, Eurobanks will probably play ball with some of the bonds they hold. I also think the rescue package will be closer to €60 billion than €120 billion. That’s still enough for one year with no default if the restructuring program doesn’t go well.

My ability to predict such specific policy responses is uncorrelated from my ability to analyze genuine economic data. I’m basing this solely on the Greek bond yields (that data does indicate default risk) and stuff I’ve read elsewhere (which is where I get the voluntary restructuring scenario from). It’s also fun to make these kind of predictions. In other words, I want to take credit if I’m right, but don’t blame me if I’m wrong. I’d wager no more than a single beer on this.