The austerity mongers at the European Central Bank and in the German government have come in for a lot of criticism from Americans, particular of the progressive ilk, and it's mostly been deserved in my view. But on the specific subject of Greece, I think a lot of the critics are not grappling with the full extent of the problem. The best possible solution for the United States of America would be for the European Union to just treat Greece the way we treat Mississippi—as a not-so-big, not-so-important, not-very-functional geographical region that's full of poor people and needs open-ended transfer payments—but there are obvious reasons why this isn't on the table politically.
But once you accept that it's not on the table, then the questions get very hard. I highly recommend Daniel Davies' "Choose Your Own Adventure" on this. The key point is that even with full default, Greece is still insolvent and Greece is not a commodity exporter that gets a quick and obvious boost from a devaluation.
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