These countries, including Greece, have far more bargaining power relative to the European authorities and the Core. This is because they could, theoretically, default tomorrow on their existing debts and not require any external aid. They would be in no worse a position than they are now and could cease paying interest.

In practice, this is politically difficult because it is frowned upon by the ECB and other euro countries, because it would undermine banks in the rest of the continent. This would no longer be problematic if one left the euro which, while legally problematic, would mean the country regains total sovereignty in monetary and fiscal affairs. The only problem then is "political" (the loss of face for the country as "non-European savages" unworthy of the eurozone and, more speculatively, the fear that this would provoke some kind of return to warring dictatorship).

But if a periphery country would default tomorrow, then ECB would not frown, they (unless they blink, which is a possibility) would no longer accept state debt as collateral, which would mean that banks crash. Or to put it in the articles terms, ECB has the means to destroy that precious primary surplus.

In general the author seems to think that the problem for the countries in the periphery is that they can't fund their public sector, ie the running a state as a business falacy. While the real problem is that while they are running a current account deficit, they can't leave without large immediate pain, and the EPP-PES politicians prefer to kick the bucket down the road while accepting some (ever increasing) pain for the forseeable future.

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