There’s an odd summer-of-1914 feel to the current state of the Greek crisis. While some of the main players are, rightly, desperate to find a way to head off Grexit and all it entails, others – on the creditor as well as the debtor side — seem not just resigned to collapse but almost as if they’re welcoming the prospect, the way, a century ago, far too many Europeans actually seemed to welcome the end of messy, frustrating diplomacy and the coming of open war.
Is there still a way out? There should be. As I and others have been saying for a while, the arithmetic is actually quite clear: Greece cannot run a primary deficit, it cannot be forced to run a large primary surplus, so a small primary surplus is the obvious solution and better for all concerned than euro exit.
Krugman's argument is that there is no way for Greece to actually pay all that it owes, so that it would be better for all if most of the Greek debt were written off and Greece was to just make mainly symbolic payments rather than write off the Greek debt, definitely blow up the Greek economy and quite possibly blow up the European economy with it.
But thus do I counsel you, my friends: distrust all in whom the impulse to punish is powerful! They are people of bad race and lineage; out of their countenances peer the hangman and the sleuth-hound. Distrust all those who talk much of their justice!
Friedrich Nietzsche...............Thus Spoke Zarathustra