HUMAN TRAGEDY apart, Greece doesn't matter any more in Europe's broader scheme of things. It is all about Italy now.
Yesterday, the yield (or effective interest rate) on 10-year Italian government bonds breached the 6.5 per cent threshold. No euro country has found its way back from bailout territory after having reaching those heights.
The euro area has thus arrived at the situation that had to be avoided at all costs. The Italian state is now at or beyond the point of not being able to finance itself. This month alone, according to the Italian treasury, €30 billion must be raised, mostly to pay off loans that are falling due. A failure to pay these debts would result in a default that would dwarf Greece's, or any other in history for that matter. Despite this, Europe continues to drift towards disaster.
The slide has continued in spite of the intervention of the European Central Bank, which has unlimited power to influence the bond market. When it buys bonds, the result is to push their yields down, but only if its buying exceeds the selling of others. Thus far, the bank has always used its bond-buying power so half-heartedly that it has saved none of the countries that ended up being bailed out.
Italy cannot be bailed out in the way Greece, Ireland and Portugal were - the amounts required are simply not available unless the rest of the world chips in, and that does not look like happening.
This leaves the ECB as the first and last line of defence. If it publicly stated that it would not let yields on the bonds of any country not already bailed out rise above, say, 6 per cent, it would calm the market.
One of a number of downsides for the ECB of such a commitment is that it would lose its leverage over governments to implement reforms. In August, when Italian bond yields were soaring dangerously, the ECB cut a deal with the prime minister, Silvio Berlusconi. In return for intervention, he promised to implement a series of deep reforms. Once the ECB started buying bonds, he reneged on his promises.
So large is Berlusconi's credibility deficit that there is hope his departure would result in investors dramatically changing their perception of the riskiness of lending to Italy. The sort of caretaker cabinet of experts which governed Italy intermittently (and successfully) in the 1990s is seen as the best hope.
The most talked about contender for Berlusconi's job is Mario Monti, a capable and disciplined two-time European commissioner who is held in high esteem across the continent. But even if Monti were to take the helm, there are reasons to doubt whether he could save the day.
Monti's only executive experience is in Brussels. He has never been in government in Rome. While the European Commission is not short of personal rivalries and bureaucratic in-fighting, it gets things done. Italy's political and bureaucratic world is depressingly different (y our correspondent has previously worked for the Commission and for two Italian public institutions).
In Rome, politicking almost always takes precedence over policy-making and implementation, while Italy's administrative culture deserves its reputation for intrigue and large scale corruption. Without a track record of success in the byzantine ways of the eternal city, expectations of what Monti could achieve may be exaggerated.