E.U. Debt: Default the Only Solution?

Her is an excerpt from an article by Graham Summers for Market Oracle:

"At the end of the day, there is really only one solution to this whole mess: DEFAULT… both by the banks and by EU nations as a whole.

What happened to Wall Street in 2008? Banks that were over leveraged (meaning they borrowed far more money than they actually had on hand) went bust because the assets they bought with the borrowed money fell in value to the point that it erased the actual money they had on hand

Think of it this way, if you borrow $30 for every $1 you actually own, and you invest that $30 in various assets, you only need those assets to fall 3% (0.03 * 30 = 0.9) before you’ve wiped out almost all of your actual money (the $1 you owned and which you borrowed the $30 against).
This is what took down Lehman. And it’s what is taking down Europe today. The entire European banking system is leveraged at 26 to 1. Lehman was 30 to 1, Europe as a whole is only slightly below that,

And where did they invest the $26 in borrowed money?
EU sovereign bonds… (as well as garbage mortgages in the various EU housing bubbles).
When you are leveraged at $26 to 1, you only need the assets you’ve invested in to fall 4% before you are totally bankrupt.

This 4% drop in asset prices has already happened across Europe, the only reason that we haven’t seen a systemic collapse there is because Mario Draghi, the head of the ECB, said he’d buy unlimited amounts of EU bonds.

Note, Draghi said he would buy these bonds, he hasn’t actually bought anything since he said this.
So why did Draghi’s statement matter?
Because the primary assets owned by EU banks are EU sovereign bonds. And if EU bonds keep falling, it results in the dreaded 4% drop in asset prices that would wipe out all the EU banks’ capital.
So Draghi stepped in last summer, promised to buy EU bonds, EU bonds went up, and EU banks could breathe a sigh of relief… for a while.

But anyone with a modicum of common sense can look at this situation and say, “but wait, nothing was actually fixed, all that happened was Draghi promised something and the markets reacted.”
PRECISELY. And that is what Cyprus just proved: that the ENTIRE EU “fix” was a huge lie. Nothing changed. Nothing was fixed. The banks are still leveraged at 26 to 1 and sitting on loads of garbage debts. And the EU countries are all still totally bankrupt.

So what happens when EU bonds start rolling over again… and what happens when EU banks start seeing their asset prices falling… falling… falling to -4% or even more?

SYSTEMIC FAILURE IN EUROPE."