oh and before I forget it - beyond loans Greece also receives a substantial amount of direct EU subsidies- to the tune of 1.5% of its GDP in 2010.

I have no idea what happens to them when Greece unilaterally defaults - but I assume they are on the table, then, too.

you are quibbling about words.

Words are revealing. Yours reveal adherence to the Spiegel/Bild Zeitung party line.

Greece receives substantial EU and IMF backed loans.

For certain values of "receives," seeing as those loans never actually make it to Greece. They exclusively go toward paying off foreign creditors who should have simply been defaulted on two years ago.

The banking sector in Greece is shaky but still alive.

The Greek banking sector crashing in the event of a default has nothing to do with the default per se, since nothing about a default prevents nationalisation and recapitalisation with pristine, newly issued government bonds. Or, y'know, telling their interbank creditors and bondholders to fuck off and die.

What could make the banking sector crash would be direct, deliberate sabotage by a European Central Bank. Which would be an even more blatant overreach of even the most generous reading of its mandate than what we have seen since the beginning of the crisis.

Failing to conduct unlawful sabotage is not "aid." That's "blackmail."

The correct response to blackmail is criminal charges.

The same can be said for tourism.

No reason it shouldn't be fine following a default.

Industrial production? Well, take whatever there is and imagine real banking and foreign trade collapse.

But that is not the relevant point of comparison. The relevant point of comparison is another year of austeridiocy followed by a foreign credit collapse (not foreign trade, because only the part of Greece's imports which is in excess of its exports needs to go - the rest can be preserved with hard currency rationing).

- Jake

If you only spend 20 minutes of the rest of your life on economics, go spend them here.

Greece receives substantial EU and IMF backed loans.

So what? Look how much Japan and USA have "backed" loans. Only europeans are so stupid that they make economic suicide because of government debt.