The latest problems concerning the Greek bail-out are not a surprise.

From a negotiating point of view it’s critical the other side believes what you say. This is an ongoing negotiation between the Financial Markets and the Eurozone countries in which the Markets do not believe what the Eurozone countries and their financial institutions are saying. They do not believe that struggling countries like Greece will meet their debt reduction targets. Nor do they believe that the Eurozone will keep pumping in money indefinitely to support these failing economies.

So, the Markets will keep putting on pressure to raise interest rates in these countries until their debt becomes completely unsustainable. The only answer is surely to:

1) Negotiate a restructuring of the debt for countries like Greece so that it actually reduce in size
2) Tackle a reform of the Euro currency head-on, possibly including releasing countries like Greece from the currency.

This might trigger a short term panic as the current debt holders have to take a haircut on their loans, but if it’s part of a believable reform package going forward, it might just work. Once the pretense is dropped that struggling economies like Greece and Portugal are sufficiently aligned to that of Euro giants such as Germany that they can form part of the same currency, then the markets may start believing in the Euro again.