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As Greece Nears Deal For Latest Bailout, Markets Yawn

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There isn't a sentient being on the planet who believes Greece will ever pay its debts, and, thankfully, that condition has been dropped from the latest round of negotiations.

Now, Greece is trying to negotiate a "voluntary" restructuring with its creditors, one that will result in those creditors losing at least 70 cents on the dollar but also one that will someone not be declared a "default."

The latter is important: If Greece were to actually default, instead of just not paying its debts, the event could trigger credit default swaps written by banks and insurance companies to protect against a default. And this, in turn, could require banks and insurance companies to pay out claims, which could deplete their capital and, possible, render them insolvent. But because Greece's default will be declared "voluntary," it has been decided that this event will not trigger credit insurance.

That's the good, if absurd, news.

The bad news is that Greece's creditors are insisting on more "austerity" measures from Greece before they agree to voluntarily restructure the debts. And as the last few years have shown, austerity does not fix the problem. In fact, it makes the problem worse. As Greece cuts government spending to meet the austerity demands, Greek workers have less income and, thereby, less money to spend. This hurts the economy. And because the economy shrinks, the government collects less tax revenue, which, in turn, balloons the budget deficit. So Greece is understandably resisting the idea that it should enact more austerity measures.

Regardless of what happens in this particular negotiation, the Greece problem won't likely go away. But the global markets have long since ceased to care about Greece. Now, the only concern among global investors appears to be that the Greek problem will spread to Portugal and other countries. And nothing that happens in Greece will prevent that.

Here's the Latest On The Desperate Attempts To Save Greece.