Over a month ago I declared that the Grexit was a fait accompli. As soon as Chancellor Merkel publicly declared it was a possibility it was the only end game. Why? Because Greek debt is (and has been) unsustainable and there were ever only two finishes to the crisis: debt-relief or Grexit. The former would be a nice thing to do in a world devoid of political reality, but, for several reasons, it is never going to happen. First, the overwhelming sense of many important creditor nations (and several peripheral ones) was that Greek debt has been a result of Greek profligacy, and those countries can’t ask their tax payers to foot the bill for early Greek retirement. Second, even if these leaders could summon the “statesmanship” necessary to face down their own electorates, relieving Greek debt would create an incredible moral hazard for the other Eurozone debtor nations. If Greece is worthy of a debt write down than surely Ireland? or Portugal? or Spain? How could the ECB, IMF or European Governments refuse? 250 billion € can be managed (heck, Quantitative Easing has printed that much already), a trillion+ would be a bit more challenging. Finally, while it has certainly been bad in Greece, many parts of the EU (and EMU) are still far poorer. As this chart shows, per capita spending on pensions of the Baltic states is significantly less than half that in Greece. Other social spending shows similar relationships. Those invoking the “morality” of debt relief in Greece must think that the Greek elderly are somehow more deserving than their Lithuanian counterparts. The Slovakian finance minister recently made clear that nominal debt relief is a “red line”.