It hasn't quite come to that yet. European leaders can still kick the can down the road a few months on the Greek default - maybe. Greece keeps coming up with "austerity" plans that they can't stick to and are edging closer to sovereign default. A debt payment is coming up October 17 and many european experts believe they won't be able to make it.

This brings America into the picture. It isn't just Greek default that is threatening the EU and the euro. It is a liquidity problem in Europe's biggest banks that also has the continent's financial community on the edge of panic. It's part of a dominoe effect if Greece goes under. The default would hit French banks particularly hard which could cause a credit squeeze - much worse than the one we saw in the US.

John Ellis at Business Insider:

In the days leading up to the collapse of Lehman Brothers, then French Finance Minister (now IMF Managing Director) Chistine Lagarde told then-Treasury Secretary Hank Paulson that he could not allow Lehman to fail. The ramifications would be catastrophic, she said. She was mostly right.

Three years later, it will be Angela Merkel talking to President Obama,Treasury Secretary Geithner and Federal Reserve Bank Chairman Ben Bernanke with exactly the same message. The United States government and the Federal Reserve must come to the rescue of the Eurozone or the ramifications will be catastrophic. And she will say that she needs roughly $1 trillion in financial guarantees and liquidity support. That's the number that will calm the markets.

She will do this publicly (it will be leaked to the FT or the NYT) because (a) she wants to maximize the pressure on the US to ride to the rescue and (b) she wants the blame to fall elsewhere in the event that the "situation" goes haywire.

And there will follow perhaps the defining moment of the Obama Presidency. If Obama goes forward and provides all or part of the $1 trillion guarantee, he will likely cut his own political throat in so doing. If Obama declines to go forward and provide all or part of the $1 trillion guarantee, he will likely preside over the second massively destabilizing financial panic in four years, thus insuring a second Great Recession, thus cutting his own political throat.

Sometimes, the choice a president has to make is between really, really bad and truly awful. That's the choice that Angela Merkel will likely drop on President Obama's desk within the next month, and probably sooner rather than later.

Ellis puts it very well. Catastrophe is never an option. And by that I mean simply, if one has to choose between bailing out Europe or going through what we experienced in 2008 only much worse, Obama will bite the bullet and do what is necessary. The Tea Party and most of the GOP won't like it - will scream bloody murder. And it will probably insure a one term presidency for Obama.

That doesn't mean our help wouldn't come without strings. Before the Europeans get a dollar they are going to have to institute reforms to assure the American taxpayer that it won't happen again. This probably means some kind of forced, partial defaults for several European countries who are on the brink right now. This is not a new idea and has been kicking around for many months. Europe must show that any American aid will help nurse the financial system over there back to health.

A lousy solution, true. But allowing the EU to simply fall apart would drastically affect our own economy, pulling it down along with the rest.