Protesting Greek firefighters occupy the yard of the Ministry of Administrative Reform in Athens, during their protest on February 8, 2017. (Credit: Louisa Gouliamaki/AFP/Getty Images)

Yes, Greece is once again stuck in the mire of wondering how it can possibly pay its debts. There’re repayments that have to be made this summer and Greece just doesn’t have the cash–thus it’s dependent upon further loans from the eurozone in order to be able to meet those payments. There are arguments about the terms on which Greece will get those further disbursements and, well, we’ve all been here before. We’ve been doing this 5 and 6 years now already. But the truth is that disastrous as this all is for the Greek economy, the poverty it imposes upon the Greek people not being a great idea either, this is really all a sideshow. The Greek economy just isn’t large enough, the amount owed not big enough, for it to all be any more than an annoyance to the other European economies. It’s Italy which is the problem, Europe just isn’t rich enough in toto to be able to cope with the same happening there.

And yet something similar might well happen in Italy:

Greece’s left-wing Prime Minister Alexis Tsipras is weighing his options as negotiations with the country’s international creditors heat up and the clock is ticking on a round of crucial elections in Europe.

There are always elections somewhere in Europe which is why so much is decided upon political, not economic, grounds. This year it’s France and Germany, which is more important than usual as they are the two largely keeping the system together at present:

The future of Greece in the euro zone is once again in doubt as creditors and Athens cannot agree on debt relief for the troubled economy.

The outspoken German Finance Minister Wolfgang Schauble told the German broadcaster ARD that in order to cut its debt, Greece would have to leave the euro zone.

Similar calls were made across the largest euro economy, where elections will be held after the summer. The German pro-business party FDP (Free Democratic Party) also said Thursday that Greece should leave the euro zone and then receive debt relief.

The FDP aren’t in fact pro-business, they’re pro-market liberals like myself. But put that aside–even the IMF is insisting that there must be debt relief. However, as I say, Greece is a sideshow. If it did default then it would be painful, no doubt about it, there would be € 100 billion or more of taxpayers’ money that would disappear into the aether. This money is already lost of course, we’re just waiting for that loss to be recognised. But in the context of the eurozone economy this is a boring and slightly painful problem, not some existential disaster. Call it 1% of eurozone GDP, and that coming off the capital account so to be spread over a number of years. Both boring and painful but no more than that.

The real problem is Italy:

Mario Draghi, the European Central Bank’s president, promised in summer 2012 to do whatever it took to save the euro, but the debt burdens of Italy and Greece have become progressively worse amid the stagnation of their economies.

Italy’s debt as a share of its economic output has risen to 133 percent from 123 percent during that period. In Greece, debt has increased to an expected 183 percent of the country’s total economy from 159 percent.

These figures highlight a harsh economic reality: Just as an individual will struggle to pay off a punishing credit card bill if her salary stays flat or falls, a country cannot reduce its debt pile without expanding its economy.