The first reason for this is that the EU pledge was less than wholehearted and thus less than convincing. The EU leaders promised "determined and coordinated action, if needed, to safeguard the stability of the eurozone." That was hardly the ringing endorsement of the Greek government and its deficit-reduction plan that was needed.

There are no specifics, either of the nature of the support on offer, nor of the price Greece will have to pay in setting its financial house in order. Most likely, the European Union will agree to guarantee or to buy Greek government bonds to get the country through this year's crisis, when $50 billion in debts have to be rolled over.

But that will not happen, German officials explained, until and unless the Greek government comes up with an agreed and credible austerity package, with guarantees and intrusive checks to ensure it is carried out.

"Greece has to help itself," German Finance Minister Wolfgang Schauble told the Frankfurter Rundschau newspaper Saturday. "We want to support Greece to do that."

Greek Prime Minister George Papandreou was outraged by the EU statement and in a televised address to his Cabinet a day after the meeting in Brussels complained that his EU partners "have created a psychology of looming collapse that could be self-fulfilling."

Moreover, Papandreou went on, the EU was itself partly to blame for having facilitated the "criminal record" of Greece's previous government in concocting economic statistics that were little more than a pack of lies. They claimed the deficit was running at 6 percent when in fact it was more than double that amount.

So Greece and the EU have between them come up with the worst of all worlds. They have made a vague political promise that they will later tackle an immediate and concrete economic problem. And in Germany, the biggest EU economy and thus the one that will have to do most for Greece (and probably Portugal and Spain as the pressure on the euro builds) the political costs of bailing out Greek profligacy with hard-earned German money look daunting.

"This is not the way the euro was sold to the Germans," commented economist Holger Steltzner in the Frankfurter Allgemeine Zeitung. "Before the deutschemark was abandoned, the Maastricht Treaty was solemnly signed, expressly forbidding a member of the monetary union from underwriting another member's debts."

German opposition is likely to stiffen as the realities of the Greek economic system begin to emerge. The Greek defense budget, for example, at almost 4.5 percent of gross domestic product is three times larger (proportionately) than that of Germany, because of the traditional hostility to Turkey. Why should Germans subsidize this ancient enmity between two NATO allies? Or why should they subsidize the early retirement of Greek civil servants, who are so incompetent at collecting taxes that the "black" economy accounts for around almost one-third of Greek GDP.

Other Europeans, who have privatized most of their former state-owned industries, will ask why the Greek state cannot sell off some of its vast holdings, which include hotels, yacht marinas, airports, banks, insurance firms, ski resorts, airports and oil refineries as well as utilities for water, gas and electricity.

"The state's stake in listed companies on the Athens Stock Exchange is worth more than $12 billion. Real estate holdings in major state property-management companies are conservatively valued at more than $400 billion and yet yield next to nothing," notes Michael Massourakis, chief economist at Alpha Bank.

Germany is relatively prosperous because its voters and workers acquiesced in keeping real wages static for more than 10 years, in order to ensure that German industry remained competitive. Meanwhile, the Greeks and Italians and Spaniards exercised no such discipline and saw their competitiveness decline against Germany by 30 percent over the same period. So German voters and politicians are in no mood to bail out bankrupt Mediterranean countries now.

But the German government knows that its banks, along with the French, Dutch and British banks between them have more than $800 billion invested in the bonds and banks of these "Club Med" countries and thus a default would be very costly indeed. So eventually they will pay up but they will first insist on their pound of flesh.

Greece has been living at about 20 percent beyond its means. So wages and pensions must come down and taxes and the retirement age must go up. This will cause demonstrations, angry riots and a government crisis that will probably provoke new elections, followed by a government of national unity to impose this bitter medicine. In the process, the office and home of the EU representative in Athens may well be burned. That is the price the markets will demand to be persuaded that Greece and the EU are serious about tackling this crisis.

As a trained economist Papandreou understands that there is bigger game afoot and that -- as he told his Cabinet -- his country had become "a laboratory animal in the battle between Europe and the markets." The hedge funds and the short-sellers are gathering and licking their lips at what is starting to look like a one-way bet against Greek bonds and the euro in the credit default swap markets.

Ironically, the Germans might not mind that at all. A falling euro is just what German exporters need to boom again. So what we are watching is Germany's favored outcome, which is for a solution to the Greek and euro crises, but not quite yet.

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