Are The Germans Looking For Partial Bond Defaults?

Over at naked capitalism, David Apgar makes the case that the Germans are holding out for partial default of some of the periphery debt:

What if there are good reasons for the preternatural calm of German Chancellor Merkel’s inner circle as the English-language media (based, after all, in the investor capitals of London and New York) light their collective hair on fire about the euro’s imminent immolation? Surprisingly, you can make a decent argument that the euro zone is at no risk of breakup – unless someone secretly switches its purpose from facilitating European trade to providing investors an implicit guarantee against losses.
The working assumption is that German calm reflects a pious belief in the power of crises to sober up borrowing governments and motivate a little austerity. It was on display Tuesday night at the French Embassy when luminaries as diverse as former ambassador Jean-David Levitte, former UNDP head Kemal Derviş, and former Treasury secretary Larry Summers all quickly agreed on it.
Suppose, however, the feasibility of Mediterranean austerity – austerity at a scale big enough to impress the bond markets – is not what Merkel’s team is counting on. Suppose instead the Germans are really counting on the feasibility of a series of orderly partial defaults.

I would guess that this is probably the best interpretation of the situation, but probably the least likely.  Since the highly overleveraged European bank system holds most of the bonds, I doubt that they are pushing to write down a bunch of debt on their books.  I really think the Germans are holding out for actual austerity, because that is the popular course of action amongst conservatives.  Partial defaults encourage moral hazard, and we can't give any ground to the profligate.  That is the position they support, and that is likely what we'll see.  In the process, the supposedly righteous will suffer along with those wastrels.  Hopefully Apgar is right, and there's more to the German position than meets the eye.  I personally doubt it.