Reports from Greek newspapers say that during the meeting between George Soros and Greek Prime Minister George Papandreou, on Monday, Soros advised Papandreou to restructure Greek debt (i.e. go bankrupt relative to the debt).
These reports dovetail with my speculation as to what went down at the meeting. Given that I also suspect that Soros discussed his meeting with Nouriel Roubini and Roubini is out with a report stating that a Greek restructuring is inevitable, you have to think that after his discussion with Papandreou, Soros walked out of the meeting thinking Papandreou was going to take his advice and that a Greek restructuring is very likely.
If a restructuring does occur, the real focus will have to be on the other PIIGS. Market thinking will likely be that Greece is just the first domino. It might get very ugly.
If they do that they will be out of the EU and on their own. They will then have to depend on the IMF for future borrowing which will come at a huge price. Even worse, they do not have an economy that is capable of supporting their government's spending levels even with reduced debt. They will need to give haircuts to pensioners as well and cut the pay and benefits of those working in government today to have any chance of surviving. That's a tough pill to swallow.
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