Alan Greenspan on the inevitability of a Greek default

There's only two possible givens: there's a Greek default or there is a fiscal consolidation of the 17 countries of the Euro Zone.

I find that unlikely except for the fact that Germany is so key to that decision. Germany's caught up in a very critical political dilemma. If they were to stop and stop supporting Greece and Greece went under, what would very likely happen, we'd get some dismantling of the euro. What the Germans are resting on is a very strong export market, the result of the fact that the euro, relative to euro, relative to the eollar, is lower.

If, however, Germany goes back to the Deutschmark, which almost surely would be worth 20% more than the euro, they would have a huge capital gain. Remember, their liabilities would be much lower, but the very high Deutschmark would mean their exports would be under severe contraction. They have this short term problem of "how do we keep exports going, employment good?" Remember, they're doing very well, a very large part of that is they are supporting the transfer of a very large amounts of money.

That keeps the euro in place. It also keeps exports, as a critical variable.

~Alan Greenspan, former chairman, Federal Reserve, CNBC interview, June 30, 2011