The Greek debt crisis is not on the official agenda at this week's G8 meeting, but it's certainly top of mind for policymakers gathering in Deauville, France.
"It is a fantasy and a folly" to believe a Greek debt restructuring can be avoided, says economist Peter Morici, a business professor at the University of Maryland. "Sooner or later Greece will have to restructure its debt."
Morici compares Greece to a homeowner who makes $100,000 a year but owes $1 million on a mortgage. "There's no debt extension that's going to work…other than writing down some of the debt," Morici says. "Sooner or later the Greek creditors…are going to have to take a big haircut."
Those creditors include German and French banks, which is why "this is a much a banking crisis as it is a sovereign debt crisis," he says. (See: A Greek Default Won't Be 'Contained', John Mauldin Says)
As a result, EU policymakers seem determined to kick the proverbial can down the road as far as possible, in order to 'buy time' for Spain and Italy. Just papering over the problem with more money — either from German taxpayers or the ECB - won't fix what caused the problems in the first place, which is the very idea that European monetary union makes sense in the first place. Still, "buying time" may prove irresistible to policymakers, Morici says.
"Politicians are like children in a candy story," he says. "They don't worry about the cavities they will receive or the money their parents will have to pay filling those cavities. They just want their candy now."