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However, as of last week, the country's four biggest banks had committed to sell just 67% of their total portfolio, hoping to hold on to the balance. This amount now is believed to have increased to almost 100% as they receive bonds issued by the European Financial Stability Fund—the euro-zone's temporary rescue fund—in exchange for Greek debt. "Greek banks were under pressure from the European Central Bank to take part in the buyback," said a senior official at one of the Greek banks. "Now the bonds they will use to borrow money from the ECB will be EFSF bonds, which means that the central bank is reducing its exposure to Greece."

Greece is one of the world's top 20 tourist destinations, traditionally drawing about half of its visitors from other European Union countries—especially from Germany and the U.K.

Prices are down some 15% from last year, according to SETE, following a 10% cut in rates charged by hotel and tour operators in 2011.

Leading German tour operator TUI AG says its Greek vacation bookings were down 30% up to March. European travel agency Thomas Cook TCG.LN +0.23% said German bookings for Greece so far are also down by 30% compared with 2011, despite discounts of as much as 20%.

In retrospect, the report said, the "program served as a holding operation" that allowed "private creditors to reduce exposures…leaving taxpayers and the official sector on the hook."

now confront the prospect of a third bailout in which they would also forgive some of Greece's debt.

All of this means that, although it is obviously important to pay attention to flagrant misbehaviors, it is probably even more important to discourage the small and more ubiquitous forms of dishonesty—the misbehavior that affects all of us, as both perpetrators and victims.

Greece cannot hope to get its deficit under control fast enough to stabilize its debt and attract private lenders. Instead of remaining a permanent ward of Germany and the IMF, Greece should default on its debt, leave the euro zone, and return to a more competitive drachma.

But he should also make it clear that lending against private collateral should not be used by commercial banks to free up funds to purchase newly issued government bonds

As Italy shows its determination and its ability to reduce future deficits, it should be welcomed back to the capital markets.

It is the second time the ECB declined to accept Greek bonds as collateral. The first was in February, after Athens imposed steep losses on private creditors in a debt restructuring. That suspension ended after a little more than an week, when the ECB received guarantees from euro-zone governments that Greek bonds posted to the ECB as collateral would be repaid.

For banks, which are already under intense pressure, it means that they will have to resort to emergency liquidity assistance which will lend them with a higher rate.It is bad news and all we can hope for is that it won't last for long," a senior Greek banker said.

Mario Boselli, chairman of the Italian Chamber of Fashion, frets that larger emerging economies still account for only 10% of total Italian exports. "This is not enough" to offset the weakness in developed economies, he says.

Both Mr. Boselli and Philip Halpin, an adviser to the Irish Exporters' Association, say the euro would have to fall as low as $1.10 (from about $1.23 currently), to produce a robust export-led recovery.

Ludovic Subran, chief economist at French trade-credit insurer Euler Hermes, warns that might not be enough. Such a depreciation would have little effect in France because high taxes and rigid labor costs reduce the potential benefits, he says.

Any euro-zone economy would benefit from a drop in the euro to the extent that it can redirect more resources to external markets. But the willingness and ability of businesses to do that differs across the region. Nadio Delai, chairman of Italian research and consultancy firm Ermeneia, say a host of smaller, less prestigious Italian shoe and textile companies have started to export to emerging markets, riding the coattails of more famous names.

It has to be through a combination of structural reforms, hoping they will work, and nominal wage adjustments, although one cannot be incredibly optimistic about the scope there. We know that that’s going to take a while.

The banks have to be recapped, and they have to be recapped not using sovereign money. I think that is really very, very high on the agenda. I don’t think they can make it without help to the banks.

If the banks were healthier, I think they would lend at lower rates

And the sovereigns have to be able to borrow at reasonable rates. As long as they behave and they do all the things they’re asked to do, they have to be able to borrow at lower rates than they currently do. Some way has to be found to do it.

We’ve done simulations. Other people have done simulations as well. 10% real depreciation would lead to a 1.4% increase in growth for a year — which at this stage, given the numbers, would be nice. The footnote, and it’s a very big footnote, is that … how much you benefit depends on how big your exports are related to your GDP and where you export — whether you export in the euro zone or outside. Unfortunately the countries that benefit the most are the countries that really don’t need it — Germany, the Netherlands. The countries that benefit the least are Greece, Portugal, Italy, Spain

There’s no question, the periphery countries have to improve their competitiveness. That’s not something even monetary policy at the level of the euro or fiscal policy can do. This they have to do through productivity improvements or nominal wage adjustments.

It is no secret that they have tended to respond to crises rather than be much more proactive.

And now there’s a sense in which they’re thinking about the full architecture.

At this stage I think there is a genuine commitment to thinking about the whole beast. That’s why these words — fiscal union, banking union — have come in.

Where I think there is still a problem is that all these things will take a lot of time. And some of these things may not happen because they’re unpopular. And meanwhile, there is a fire in the house. So they have to be willing to do more in the short term.