A Financial Times blog summed  it up better with this quote from an unnamed European official overnight: “We’ve lost the main parachute and we’re on the reserve chute and we’re not sure that will even work.”

Being Europe, the one-day summit has turned into six days of talks, horse trading and garment rendering, especially in Paris and Germany.

France and Germany turned on Italy and told Silvio Berlusconi to do more in cutting debt and spending. France’s Nicholas Sarkozy turned on Britain’s David Cameron and reportedly told him top stop interfering in euro matters when Britain had refused to become a apart of the eurozone (lucky Britain).

No decisions yesterday in Brussels, but lots of leaks about agreements being “outlined”, “close” to being clinched or “on track” for ratification on Wednesday. But all along the €360 billion souvlaki in the back of the room refuses to go away and the 17 or 27 leaders in the summits, and their advisers refuse to confront the monster head on.

Tomorrow night, our time, German banking giant Deutsche Bank reports its third quarter earnings, an hour or so after struggling Swiss giant UBS reveals its results.

Both will show writedowns on any Greek debt of 21%, which is too low. The banks have now offered 40%, but 50% cuts seem to be the stating point, so analysts will crunch the numbers to see what cuts of 50% to 60% would do to the capital positions of each bank, and how much new money would be needed.

The comments from both banks on the crisis and market reaction will tell us more about the chances of success on Wednesday than anything to be said by the politicians.

And there’s no certainty that we will get a decisive agreement Wednesday night our time, from this crazed situation. Sunday saw all 27 EU heads of state meet in Brussels and that turned into the heads of the 17 eurozone members.

France and Germany want to use the €440 billion stability fund (about $A600 billion) and gear it up, use it as an insurer and to write various financial derivatives to help protect Greece, European banks, Italy, Spain and perhaps even France.

No one in power in Europe has stopped to point out that what is being proposed is frighteningly similar to the way Goldman Sachs, Merrill Lynch, Morgan Stanley and a host of other groups ran their businesses into the ground and nearly topped the US and global economies in 2007-09 in the GFC. Now in their desperation, Europe wants to go down the same track. Germany is backing some of these moves because it doesn’t want to put any more money into the rescue (€211 billion).

France wants the Stability Fund used in such a way so as to limit the cash call on the country for the fund and the protection of its banks. With Moody’s and Standard & Poor’s giving France a warning that it will lose its AAA rating of there is a recession, or government finances worsen. The one way they can worsen is to be forced to spend billions of euros on helping strengthen the fund and the country’s weak banks.

France has a presidential election next May and June. President Sarkozy is weak in the polls and he doesn’t want the AAA rating put under pressure before then. As a result, the 15 other members of the eurozone and 25 members of the EU are minor participants.

But stop for a moment and ask the most basic of all questions are the talks really going to change anything where Greece is concerned? The bottom line is that the talks this week are misplaced and unrealistic.

One quote from a highly secret document leaked to the Financial Times at the weekend within hours of it being completed and sent to the IMF, EU, European central bank and leaders of the various countries, summed up the reality of what is happening in Greece.

“Recent developments call for a reassessment,” the report, entitled Greece: Debt Sustainability Analysis, said. “The situation in Greece has taken a turn for the worse.” The report, according to quotes in the FT, went on the lay out the true situation in Greece. It is insolvent, illiquid and slowly imploding. There is no hope in saving it by spending more money.

It was based on tests run on the Greek economy by economists working for the three lenders in Greece’s bailout: the IMF, European central bank and European Commission. It says Greece’s bailout needs could balloon to €444 billion in a worse-case scenario. If you hadn’t noticed, that’s €4 billion more than the size of the European Stability Facility, the so-called bailout fund that France wants geared up to the hilt to protect Europe.

This means Greece could need €254 billion in new bailout loans in a package that would last until this end of this decade. That compared to the €109 billion bailout package agreed to in July, which was lifted from the previous one of less than €90 billion.

And that new estimate is based on banks taking a loss of 60% or more on their loans, which would in turn mean some €200 billion of new capital would be needed to keep EU banks solvent and afloat. If the cost is any more, then the banks could be looking at write-downs of 70% or more. Greece has about €360 billion of debt, much of that held by its banks, so they would have to be recapitalised as well, along with French banks, led by Credit Agricole and Societie Generale, which controls a Greek bank each.

The report also made clear European leaders are considering “haircuts” on Greek bonds far higher than previously known. The study determined that in order to bring a second Greek bailout back to the €109 billion agreed in July, bondholders would have to take a 60% loss on their current holding. According to media reports this morning, the banks only want to offer 40%, which is too little.

Europe should be preparing for an orderly default for Greece, with money to backstop banks and countries such as Spain, Italy, Belgium and even France. No other path of action is realistic any more.

Under the tests run in the report leaked to the FT, Greece’s debt to GDP ratio is seen peaking at 186% in 2013 and “falling” to 152% by the end of 2020. No country or company can escape that burden, no matter how much the European and world economy booms. It is unrealistic and a burden no country ought to carry, no matter how profligate they have been, and the Greeks have brought much of this on themselves.