It's really a mess. But one thing should be clear: it's in the interest of all the negotiating parties to be as apocalyptic in their warnings as possible. If the Greeks don't draw a hard line, they get a raw deal, and the same goes for the European Union, and the constituent governments, and the ECB, and the IMF. Ultimately, everyone expects that the negotiators will back down and an agreement will be reached, but in the mean time it's worth it to negotiate like a madman. The big downsides to this are, first, that it gives everyone reading newspapers a fright. And second, when so many parties are playing this brinkmanship game, there's always a risk that something goes awry and a deal isn't reached. Frankly, Europe isn't giving markets a lot of reason to be confident that the process of handling Greek insolvency is actually, underneath all the posturing, under control.
The logic of brinksmanship was put famously (and well) by Thomas Schelling. He described nuclear deterrence as two countries, chained together, dancing closer and closer to the edge a cliff, over which they'd both tumble if one of them slipped. And I've written similar things along those lines over the past year or so. At this point, however, I wonder how well the metaphor fits. The Greek political economy does not remotely resemble a unitary actor, at this point. Tens of thousands rioting in the streets, government turnover and possible recall, etc. It looks like Greece is racing full-steam towards the edge, attached to the rest of the EMU by a fairly thin cord, while Germany and France stand well back from the edge, holding scissors and debating whether and when to cut loose.
It's unclear whether this puts "Greece" at any bargaining advantage, because it's unclear what "Greece" represents and therefore what it desires. More accurately, there is an internal battle in Greece over the value of Euro membership. Germany and France can alter the terms of that membership on the margins, mostly by buying time, but they can't change the game. Even if some elites wanted to, Germany and France are limited by their domestic polities as well.
We need a new metaphor.