Is Greece going to set off the long feared next wave of the Great Recession?

Check your sources before posting articles like this one, from 2 law professors with zero background in sovereign debt defaults, international law, or even just plain bankruptcy law (domestic US). If they're your basis for your assessment of German politics, you better look further than "Slate"'s contributors.

Mitu Gulati
Professor
Mitu Gulati is a Professor at Duke University. His research interests are currently in the evolution of contract language, the history of international financial law and the measurement of judicial behavior. He has authored articles in journals such as the Tulane Law Review, the University of Missouri Law Review and the Maine Law Review.

Eric Posner
Professor Posner's Personal Web Page

Eric Posner is Kirkland and Ellis Professor of Law, University of Chicago. His books include Law and Social Norms (Harvard 2000); Chicago Lectures in Law and Economics (Foundation 2000) (editor); Cost-Benefit Analysis: Legal, Economic, and Philosophical Perspectives (University of Chicago 2001) (editor, with Matthew Adler); The Limits of International Law (Oxford 2005) (with Jack Goldsmith); New Foundations of Cost-Benefit Analysis (Harvard forthcoming 2006) (with Matthew Adler); and Terror in the Balance: Security, Liberty, and the Courts (Oxford 2007) (with Adrian Vermeule). He is also an editor of the Journal of Legal Studies. He has published articles on bankruptcy law, contract law, international law, cost-benefit analysis, constitutional law, and administrative law, and has taught courses on international law, foreign relations law, contracts, employment law, bankruptcy law, secured transactions, and game theory and the law. His current research focuses on international law, immigration law, and foreign relations law. He is a graduate of Yale College and Harvard Law School.

You had anything to contribute to the topic? No? Why bother posting your infantile temper tantrum here? Address it to someone else.

Surprisingly, our thermodynamic model matches with the conventional model of the financial market based on the efficient market hypothesis. In our model, as in the conventional model, there is no possibility of arbitrage for the great majority of actors of the financial market. The only difference is that by our model such a possibility exists for small groups of actors -- designers of financial heat machine.

High Seas wrote:

...what is the legal probability the court will finally agree with them, and - if they do - how will it affect the EU "stability" pacts?

Very small, I think, considering their last rulings.

"The winner of the fifth annual Financial Times ranking of European finance ministers, Germany’s Wolfgang Schäuble, could prove a controversial choice. Berlin’s tough stance at crucial moments in the past year often infuriated its neighbours. It delayed aid for Greece and scared financial markets by talking early on about private investors paying towards future bail-outs. On both occasions, its actions exacerbated eurozone difficulties. Mr Schäuble’s proposals for future eurozone governance included an “orderly insolvency mechanism”, anathema to Paris."
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http://www.ft.com/cms/s/0/5e0f8748-009f-11e0-aa29-00144feab49a.html#axzz17KFqbs80

Admission of Failure

Even worse, however, is the situation in Greece. Last year, the European Commission, the ECB and the International Monetary Fund (IMF) assembled a special rescue package for Greece in order to help it avoid defaulting on its loans. But, since then, things haven't gotten much better.

After a year of financial adjustments and reforms, prices for Greek sovereign bonds are lower than they were when the rescue effort was launched, and their yields have reached record highs. Indeed, the country's government has almost the same credit ratings as it did 12 months ago.

This development can be seen as a vote of no confidence by investors in the EU's rescue measures. Players on the financial markets simply don't believe that Greece will be able to stand on its own two feet any time soon. And now there is the risk that something will happen that the Europeans already tried to prevent last year, namely that Greece will be forced to restructure its debt.

Despite all the denials, there is a growing realization that a so-called haircut can no longer be avoided. SPIEGEL reported last week that the IMF is putting pressure on Athens to restructure its debt. And it's not just the IMF that is pushing for Greece to take a haircut: Among euro-zone finance ministers, too, support is growing for the radical solution, which would involve holders of Greek sovereign bonds taking losses.

Last week, during a meeting of the European Commission, European Monetary Affairs Commissioner Olli Rehn told his colleagues that they shouldn't speak publicly about a Greek debt restructuring, but that a restructuring would have to be carried out in good time. If things really came to that, he said, it would be nothing less than an admission that the euro zone's approach to fighting the crisis had failed, at least in the short term.

I assume the player faced with "zugzwang" in this case is the EU. ...... The EU has likely evaded the immediate crisis, but, by adding moral hazard, has increased the risk of a far worse subsequent one.

the words mean "Greeks" and "creeps":

Griechenland unter Trickserei-Verdacht

The reluctance of the Greeks to face the facts of their long-held economic illusions is understandable enough in human terms, but so is the irritation of the Germans about bearing some of the consequences.

We too have unsustainable (but still manageable) levels of debt;

You’d have thought that Athens has virtually no cards left to play, yet the threat its travails pose to the eurozone as a whole gives Greece something of a whip hand. In the game of brinkmanship currently being played out in Athens and Brussels, Greece is not entirely without negotiating power.
Give us the money, the Greeks can say, or we’ll pull the whole house down with us. As Europe’s policy elite is only too painfully aware, the cost of refusing is likely to be infinitely greater than that of coughing up, however politically unpalatable it might seem to the solvent north. Neither the IMF nor the eurozone can afford to let Greece go.
Yet disingenuously, the pretence is maintained that the crisis is no more than a bit of fiscal ill-discipline in the profligate fringe that corrective austerity can easily eradicate.
Unfortunately, it’s much more serious than that, for the fiscal crisis now manifesting itself in sky-high sovereign bond yields is just part of an ongoing and European-wide banking crisis.

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