Will a further bail-out for Greece change the negotiation dynamics with the financial markets over the Euro? Only if it results in the financial markets feeling that Greece can pay its debts and that the EU can afford to sustain its current levels of support until Greece does. An absolutely critical part of this would be for existing Banks who are debtors to agree to the “voluntary” re-scheduling of their debts, to give Greece some breathing space. Without this any further bailout package will not seem credible.

It will be interesting to see if Banks are prepared to step up in this way on a voluntary basis. Generally, asking someone if they would like to give you what you want is not an effective way of bidding. It’s like the difference between saying “I want x” and “Would you mind giving me x?”. The former has much more impact. The problem for the Eurozone of course is that it can’t force debtors to participate – any such compulsory re-scheduling would itself be deemed to constitute an event of default.

In any event, all of this only becomes relevant if the Greek Parliament votes to pass the latest austerity package. Is that certain? One problem may be that local Greeks are very conscious that there doesn’t seem to be much of a “win” for them in complying with the austerity programme demanded by the Eurozone countries as the price for further bail-out assistance. Often if people feel there is no prospect of a “win” in a negotiation, they start to play lose-lose, saying to themselves “if I can’t win I’m going to make sure that you lose too”.

If it was up to the man-on the street, the package would probably not get passed, with all the resulting chaos in the markets which that would cause. I suspect the package will get passed by Parliament as there isn’t any other rational choice. However, if the sentiment from the streets sways the Parliament and the package is not passed then things could get very interesting.

It has been speculated over the past few days that China may be prepared to step in and buy billions of European debt in order to keep the Euro alive, which I’m sure the Eurozone and the ECB would be very grateful for right now. However, the downside of this is that it could increase China’s bargaining power over the Eurozone in future economic negotiations with the West, making us increasingly dependent on the goodwill of the world’s most powerful economy. Would this be a price worth paying to save the Euro?