The sheer scale of deficit for a growing number of Euro zone members makes it almost impossible for them to escape the debt trap without going through an eventual restructuring. This is despite the 750 billion Euro collateral put aside for those that may need to tap into it, which in reality serves as a temporary "band aid" to buy some additional time. The governments should not expect to be able to resolve their debt woes by simply becoming more frugal with their spending as a tightening of the belt will have the dangerous side effect of weakening consumption at a time when its needed most. In fact, it is not far fetched to think that belt tightening at this stage could trigger a protracted recession/depression. The G20 summit conclusions are therefore very worrying given that the consensus worry seems to be the risk of a surge in inflation which would mean that they are attaching less importance than would be warranted to the debt driven recession.
As the graph on Greek debt CDS spreads above shows, the problem is far from being resolved, and, in some ways may actually be getting worse.
