So the EU has no option but to bail them out, and also, maybe, to create an escape route so that Greece can exit the euro and devalue its currency.
So far so good. But what else needs to be done to get the Greek economy back on its feet?
Orthodox economists will prescribe more austerity measures, because austerity is the only medicine in their locker.
However, the austerity medicine is not working, in fact is is making the patient worse. Unemployment is rising, and with it public anger is rising too. Demonstrators and rioters want to bring down Papandreou's government. They may succeed.
But what would any incoming government be able to do? What is the alternative to austerity? Clearly, there needs to be a New Economic Deal, not just for Greece but also for the whole world.
There are two interesting, radical treatments available:
- Tax the rich.
- Form Local Currencies.
Tax the Rich
Greece will have its fair share of billionaires and corporations who could dip their hands into their pockets and annihilate Greek debts with their small change. A one off wealth tax might go far to bringing Greece's debts within manageable proportions.
Why is this not done? For the same reason it is not done in the UK.
The rich simply threaten to move away from any country that has the temerity to apply serious taxes to the super rich.
The solution is therefore blindingly obvious, a solution that will help not just Greece, but also every country in the world.
Close all tax havens, and agree a global regime of taxation to mega-rich individuals and corporations.
This will benefit all the world's economies, including ours. If Governments governed with the interests of the people in mind, they would have done it years ago. Our leaders do not govern on behalf of the people, they govern with the interests of the rich in mind.
This has to change.
There is a G20 meeting in France this autumn. We should be lobbying already to put a global tax regime on the agenda.
This is the main item for Greece. Other points to note are that Greeks need a general taxation system that is fair and with which people comply.
At the same time as forcing taxation onto the rich, the Greeks should also be creating local currencies.
This is a big topic, but essentially, money, like power, is ultimately created by the people to help them conduct economic transactions in an economy that is larger than a tribe - tribe/clan sized economies can work on barter.
Local currencies should be devoted to meeting basic local needs - water, food, energy, housing, recycling, and in the case of Greece, tourism. No-one can challenge that that is a sound investment.