BBC:

"Berlin, backed by the Dutch, Austrians, and Finns, have been arguing for weeks that there can be no new bailout of Greece without the country's private creditors being forced to suffer losses on their loans. Otherwise, they argue, European taxpayers will be shouldering the costs while the international banks pocket the proceeds.

The ECB, the European Commission and other EU countries led by France argue that this could pave the way to disaster, with the financial markets decreeing the compulsory "haircuts" on private bondholders a Greek default, a "credit event" that could lay waste to the single currency.

"We are against any sort of default with haircuts and any form of private-sector event that could lead to a credit event or a rating event," Constancio said."
http://www.guardian.co.uk/world/2011/jun/15/europe-warned-greece-financial-crisis

So we have an impasse, both positions make no sense. This was bound to happen sooner or later. They do not want default, but they do not want 'haircuts' on the loans, and they do not want the single currency to fail. But Germany also does not want to keep bailing out the bad loans that it and the other Euro big nations have made. In effect, what they are saying is that they wanted the Eurozone if it meant they win from it financially, but not if they have any responsibility for losses. This represents the position of the German ruling class, but not all, because some German banks will want the endless bail outs, because it is they who need bailing out. And some big French banks too. But anyone can see that this must come to an end somewhere. The debts are unsustainable and so are its bailing out. Something has to give. The ordinary people cannot keep being made to give up their public wealth to the private banks. Even if they did, at the end of that road exists a notional single private bank owning all public debt and assets (i.e. owning Greece), and thus becoming effectively the state, i.e. that would be de facto socialism of one type or another, probably national socialism. No capitalist wants that solution in general, for this is why they break up monopolies (because they in the end mean the death of capitalism as such), but each individual capitalist entity, fighting for their share and to avoid taking the hit, will not try to prevent it, they only want to protect themselves.

So what will happen? What can happen? Greece will default one way or another. Either Germany or Greece or both will have to effectively withdraw from the Eurozone, at least as a financial structure. Or can it be fudged, they take on the option of the haircuts but try to call it something other than a default?

This seems to have been tried, but it does not fool anyone, it is still a default. And even if suiccessful, Greece still defaults. In fact the bail outs would have to be a permanent feature of a united European currency for the long term, as for instance California in the USA is a part of the USA. But Europe is not united in this way, it is just set up for the benefit of the big nations, and these do not want the responsibilities of a real central government, so they will each go their separate way if this is political issue is left unresolved. So the German project of a unified Europe flounders on its own selfishness and the profligacy and greed of its banks. Its 'sober' and 'successful' capitalism eats itself.

How the mighty have fallen from their self made pedestals.

It looks like they might just try to stave off the culmination of this crisis, yet again In a sense they seem to be waiting for the Greek people to decide what they will do, given it is only they who have any choice and power at this time, the politicians are too hampered by their masters the banks, who want two things at the same time which are in contradiction to each other. Yet the politicians also fight the Greek people with all the forces at their disposal, because they wish to blame the people for their plight, so they are also hampering any (albeit temporary) conclusion to the crisis in this way too. So even on this front there is an unsustainable stasis. An event is awaited, a spark that will change things, some fortuitous or unfortuitous happening. The bourgeoisie keep things the same, they prolong, and cross their fingers, shuffling the lame parliament, trying to reinvigorate the semblance of democracy, for no particular reason than their is nothing else left to do.