[T]he real threat of a Greek default is in the example it would set. Citizens of other European nations would see the chaos; they might figure that their savings would be safer in German, rather than Portuguese (or Italian) banks. Bond investors might feel the same; yields would rise further. Official creditors (including the ECB) might take a hit, making it even more difficult for them to participate in other bailouts.
For all the bluster, one can't help feeling the tough EU stance is a bit of a bluff. They can't view a Greek exit with anything other than fear.
What happened in the last few days is something quite shocking to the Eurocrats. Someone actually asked the people of his own democratic country if they approve of deep and lasting austerity as a worthwhile price to keep the euro. So finally, we have a rogue force in EU decision-making: democracy. I know there are enormous systemic risks in delaying the implementation of the deal made last week; but there are also profound long-term risks in pushing for the deeper European integration required of this crisis without popular, democratic consent.
I'd prefer temporary chaos that can cede to a democratic reality; than a papered-over deal, hated by the southern European population, that could lead to a populist explosion down the line, especially if another recession hits. We're already seeing the paradox of accelerating the loss of sovereignty past the popular national will: you actually increase nationalism and division, rather than ameliorating them. In other words, the EU begins to defeat its own reason for existing.
And, yes, this has already begun to happen. Sarko's and Merkel's thinly veiled contempt for Greece prompted memories of the Nazi occupation to be revived in Athens. Britain's Tory Euro-skeptics are beginning to flex their muscles again in the British parliament. German voters may soon reach the real end of their patience with the Greeks and Italians. And more and more, we keep hearing of the next domino that could fall. France?