Albert Einstein is reported to have said that insanity consists of doing the same thing over and over again and expecting different results. By those standards, the deal with Greece that is about to be agreed looks insane. The only justification, as I argued in a column on May 10, is that it is needed to play for time. This is a bad strategy. Something more radical is required.

The question about the prospects for Greece is not whether the country will default. That is, in my view, as near to a certainty as any such thing can be. The question is whether a default would be enough to return the economy to reasonable health. I strongly doubt it. The country seems too uncompetitive for that. A default is a necessary, but not a sufficient, condition for a return to economic health.

Greek performance under the programme agreed with the International Monetary Fund in May 2010 has been quite impressive. But it has also failed to return the country to solvency. The spread between Greek and German 10-year bonds has gone from 460 basis points (4.6 percentage points) after the programme was announced to 1,460 basis points. Much the same has happened to Ireland and Portugal. More dangerously still, even Spanish spreads have reached 270 basis points (see chart). Greece, Ireland and Portugal have no chance of being able to borrow in the markets at rates they can afford in the foreseeable future.