The eurozone sovereign debt situation is on a cliff edge. This may sound like a statement of the obvious given the chaos within financial markets, but there is a very real sense in which this analogy holds. If sovereign debt default is limited to Greece, then it may be possible to contain the problem. There will be good ways and bad ways of dealing with the problem of Greek default, but Greece is relatively small compared with the total capacity of European financial markets so catastrophe should be avoided. If Spain, Italy, Ireland and Portugal do not default, we just stay on the land side of the cliff.