Updated: Greece to Engage in 'Selective' or 'Restricted' Default

Eurogroup head Jean-Claude Juncker

The undeniable fact that a Greek credit event was imminent was prognosticated here in late May. The situation on the ground in Greece, the lack of political will in the Eurozone, and the simple arithmetic all made kicking the Greek debt can much further down the road simply improbable.

Now, at last, we have all but final confirmation from the horse's mouth of what many since last year have known all along: Greece will default.

What happens next?

This is much more difficult to predict and will depend on just how exposed fragile financial institutions are to the ripple effects of default, and how credible the new package which accompanies Greece's default. If contagion spreads uncontrollably to Italy and/or Spain, look out below!

Update: On the newly announced Eurozone bailout program, economist Willem Buiter has a nice quote: “The EFSF has gone from being a single-barreled gun to a Gatling gun, but with the same amount of ammo. It needs to be increased in size urgently.” 

The failure of Europe's leaders to increase the size of the bailout fund speaks to the lack of political appetite in Germany and other northern European countries to support further bailouts, as well as a failure to understand just how big Europe's debt problem is.

Any predictions on the half-life of the latest can-kicking measure before there's blood in the water again?