Most people believe that if Greece exits the Eurozone there’ll be some upheaval, then the ECB will step in to calm things down.
At what point do people realize that the ECB can’t resolve the issue? The LTRO is now a distant memory. It actually increased the risk of a meltdown in the Eurozone by tying the banks’ fates to sovereign bond markets. As sovereign bond yields rise, they act as festering wounds to banks’ balance sheets.
Will Germany relent and let the ECB print till kingdom come? Perhaps, but oil prices will likely move higher should they. Stagflation is affecting Europe and that makes monetary stimulus a impediment to economic growth, not a panacea.
Finally, if Greece goes, then a precedent will have taken place. Investors will start to look at Spain (which has massive problems as well). Spanish bond yields are above 6%, signaling that contagion has already started.