Since virtually everybody is agreed that the current bailout plan cannot work for Greece, let us review the practical options in a realistic way.
1 Staying in the euro This will require a 75% write down of all Greek debt (for creditors a grade one haircut) and printing enough Euros to re-boot the Greek economy, about e20 billion should be enough to ignite recovery and growth. Germany will never agree to any of this. So it is a non runner. The Germans are themselves thrifty and careful with money and debt write offs are anathema. They have an irrational fear of printing money which inhibits the proper functioning of the euro currency. Britain printed £375 billion to get its economy moving again after the crash and the US printed about $2 trillion. Both the $ and the £ devalued but have now recovered and the two economies are now growing well.
2 Semi-detaching from the euro A common sense alternative to crashing out altogether would be to allow the Greek Euro to float downwards within a wide enough margin to kick-start a devaluation led recovery. This would be achieved by allowing the Greek Central Bank to print about Ge50 billion, but with the ECB standing backstop to intervene if the floated Greek currency dropped below 60% of the value of the German controlled main euro. There would still be a grade one haircut of existing debt, but there would be no more borrowing. At a point somewhere in the future it might rejoin. On the face of it Germany would say no, but if you listen carefully to the whispers now circulating in the German political and financial establishment, the position could be about to change.
3 Leaving the euro for good This would involve a total write-off of all Greek debt, the reintroduction of the drachma and the intervention of the IMF. Greece would need a loan of about $50 billion to buy gold to back the new currency to give it a worth of about 50% of the current euro. The losses to Euroland would be substantial and it would be seen as a humiliation of Germany and a euro car crash generally. On the other hand it might be the best for Greece which could remain in the outer circle of the EU which Britain is presently marking out for itself. Greeks and Germans are good at mixing on holiday, but as economic partners they are a fiasco.
It is unlikely that wise enough councils will prevail to adopt any solutions in the shape of the above. Whatever happens next will therefore not be good.