Round and round the mulberry bush

The BBC's Peston casts an interesting light on the Greek demands for a bailout (my emphasis):

Greece desperately needs those few billions of euros to pay its maturing debts to... the IMF and the European Central Bank.

With 300m due to the IMF on Friday, and a further 1.3bn euros later this month, this has always been a row about book-keeping entries and the accounting treatment of debts.

It is a dispute about whether the eurozone's creditors will release funds so that they can pay themselves and avoid having to call Greece in default.

Or to put it another way, it is all about whether the IMF and eurozone can keep up the pretence that Greece is a sound and solvent debtor.

But doesn't it normally tell you something pretty important about those who owe you money when you have to lend to them so that they can keep up the payments to you?

History suggests that at some point the IMF, ECB and eurozone will have to recognise that Greece's 320bn euros of sovereign debts is a lot of spilled milk that will have to be cleaned up.

I rather doubt if our teutonic friends would see the matter as essentially about book-keepiong and accountancy.  For them, it is a question of moral hazard - the Greeks have been naughty and must be punished.  But, as Mr Peston points out, it is difficult to see a way out of the impasse without some element of debt forgiveness.