While the Greek debt crisis continues to garner some headlines there appears to be a growing complacency among commentators (and more worryingly the markets) that all will be right in the end and life can go on as normal.

Well sorry to upset the applecart but that view is utter balderdash as it is becoming increasingly clear that this is a game-changer and whether the ultimate denouement is postponed by fudge for a few years, or comes crashing upon us over the coming weeks, it will not be pleasant and throws a harsh light on our own current situation.

The recent EU-IMF rescue that was heralded by EU politicians is clearly nothing of the sort. At German insistence it only provides funding for Greece at market rates. Well those rates have blown up to between 7% & 8%and if Greece actually reaches the point where it can't get market funding the rates are likely to have gone higher still. Bearing in mind Greece faces deflation to get its fiscal house in order, this could lead to crippling real rates of 10% or more, on debt that is already out of control. Hardly a rescue.

However the alternative to a rescue is inevitable default as not only does Greece have to issue plenty of fresh debt it has a significant amount of existing debt rolling over before the end of May. Some optimists have been saying that at current yields the new dollar issue of between $5-$10 Bln that the Greek Government is hawking across the US will whet the appetite of Emerging Market Debt (EMD) investors. Well although some may step up to the plate (with BCA Research recently suggesting Greek debt looked attractive at those yields) it is hard to see why when you look closely.

Speaking as an actual investor in the asset class one of the key attractions of EMD is not just its high income yield it is the fact that the underlying finances of many of these economies are very strong, completely unlike Greece. To highlight the point lets look at some debt to GDP predictions for 2011 (figures from the OECD and IMF): Japan 204%, Italy 130%, Greece 130%, Ireland 93%, Portugal 97%UK 94%, US 100%, France 88% and just so they don't feel too smug, Germany 85%. Compare these figures to the following regional averages: Asia 41%, Central Europe 29% and Latin America 35% (no really, and that is with Argentina in risk of default again, showing how strong the finances of other nations are). Why would you want Greek debt?

Intervention this weekend?

With things so difficult one UBS analyst says "external intervention may be unavoidable and could happen very soon as the situation is untenable. We think an intervention over the weekend is a distinct possibility". But at what rate and what terms? In an effort to save the Eurozone Germany may bow to pressure and allow financing at 4-4.5% and stave off collapse (ignoring the legal action some Germans are preparing to stop any such move) but this will only delay the inevitable as Greece will not do an Ireland and make the necessary cuts (We would take the just announced 40% deficit cut for the first quarter with a handful of salt. This is the nation that massaged its GDP figures by including the economic impact of money-laundering and prostitution to help gain entry to the Euro). What is more Greek banks are already facing massive difficulties as their rich have withdrawn up to €10Bln since the start of the year (remember this is a country where only 6 people admit to earning €1m+ per annum) and are already receiving government support.

In the short term it is probable that a further fudge will be found but recent talk from Trichet that "default is not an issue for Greece" sounds like talk we heard before the sub-prime collapse, Bear Stearns, Lehman Brothers, AIG, RBS, HBOS and others. Talk is cheap, the fundamentals look horrid and the risks massive, although we will perhaps delve further into the specifics another time.

The stock market? It's up again.