“This high concentration of sovereign debt in European banks raises the possibility that the banks may be severely undercapitalized—and may require a government recapitalization or face failure themselves. Even the European Central Bank, which now holds a huge amount of Greek debt, may need to be recapitalized.”
But the ECB is able to print Euros to recapitalize the banks, and that is exactly what they would do. They would make good the losses out of thin air. This might cause inflation, but that is certainly better than the alternative.
I think the situation is so long and drawn out in comparison to our meltdown that they have made all the preparations in regards to their banks. The issue is the size of the haircut they may have to take.
What you say might be true - but it'll make countries like Greece winners - and responsible countries like Germany, losers.
Somehow or other that's not gonna be a good long term solution...
Best argument for a gold or commodities backed currency: it keeps governments honest.