THE MERE THOUGHT

http://news.yahoo.com/analysis-leaving-euro-carries-massive-costs-181337877.html

"Already, Italy's borrowing rates have jumped to record levels at the mere thought of a Greek default. If Greece does default, investors would be prone to think that other countries might, too — and they know full well that Italy's economy is too big for Europe to bail out.

French President Nicolas Sarkozy claimed it would never come to that.

"We cannot accept the explosion of the euro, which would mean the explosion of Europe," he said in Cannes at a summit of leaders from the Group of 20 most powerful economies.

But Europe's defenses are still weak. If it were aggressive in buying national bonds, the European Central Bank might be able for a time to keep a lid on those borrowing costs before they rose to the point that Italy's government would no longer be able to finance itself on capital markets.

On the other hand, if the ECB were to shy away from such an approach then the risk of contagion would grow. The ECB made clear Thursday it is uncomfortable playing such a role.

Greece appeared to step back from the brink on Thursday and canceled plans for a referendum. If its feuding politicians can agree to the plan launched in Brussels last week, they'll get the next batch of euro8 billion ($11 billion) in bailout money.

But even then, the problems are far from over.

True, the agreement would reduce Greece's debt — but not by much. In 2020, in the best scenario, Greece would have the same level of debt that it did three years ago."

When the crisis began.