Greek debt crisis demonstrates perils of lending to your euro friends

Eurozone must develop insolvency procedures that prevent other member states - and their taxpayers - becoming creditors through debt mutualisation

After months of games and brinkmanship, and only a week after Greek voters rejected the conditions for a a7.5bn (5.3bn) rescue package, the end came swiftly. The eurozone's political leaders agreed to start negotiations on a much larger package, worth a86bn , almost half of Greece's GDP. Unfortunately, the deal reveals Europe's apparent determination to reenact the same tragedy in the future.

Over the past five years, a whopping a344bn has flowed from official creditors such as the European Central Bank and the International Monetary Fund into the coffers of the Greek government and the country's commercial banks. But after six months of near-futile negotiations, exhaustion had set in and holidays were beckoning; so the actual conditions for a new Greek rescue were given short shrift. Although the European Financial Stability Facility (EDSF) had officially declared Greece bankrupt on 3 July, the eurozone's leaders kicked the insolvency can down the road yet again.