The situation in Europe in regard to Greek debt may be entering a new phase, and I’m talking about something more serious than tear gas and Molotov cocktails.

Now that the EU and the IMF have agreed on (and the key legislatures have ratified) a 110 billion euro bailout for Greece, the question has become: will it be enough?

Greece faces unusually severe austerity budgets, and probably a deep recession. Even with reduced government spending and a bailout package, it’s possible that they won’t be able to generate enough economic growth to stay ahead of their debt. In fact, that outcome is likely.

Attention will soon shift to the large European banks that are the holders of much of the Greek debt. If a default should occur or even appear more likely over the coming weeks and months, those banks will have a hard time doing business. And after the last financial crisis, many don’t have the balance sheet strength to weather the storm easily.

In my view, the only possible outcome that isn’t precluded by political problems (aka lack of leadership), is for the European Central Bank to print enough new money to allow the value of the euro to drift lower, possibly as low as parity against the dollar.

What you need to be concerned about is that signs of impaired interbank liquidity are now appearing in Europe. I get this from market data and from information from correspondents. It’s still very, very early, and I’ll be sure to retract this statement if conditions improve. And it may just be the uncertainty of the coming weekend, combined with the inconclusive British elections.

But a reluctance to take short-term counterparty risk is the same pattern that presaged the last financial crisis.

At this moment, there is NO INDICATION of any liquidity problems in the US. No spike in the Fed funds rate, no raggedness in repo or commercial paper. So far it’s all in Europe. Stay tuned.

This story first appeared at The New Ledger.