Must-Read: As I first said back in 1995: Yes, Mexico had sinned against the Gods of Monetarism. But the punishment inflicted was way out of proportion to the initial sin, and strongly suggested deep fundamental flaws in the international macroeconomic order. The same is the case for Greece today.
The Awesome Gratuitousness of the Greek Crisis: "But doesn’t the ultimate cause lie in wild irresponsibility on the part of the Greek government?...:
...What strikes me is how relatively mild Greek fiscal problems looked on the eve of crisis. In 2007... public debt of slightly more than 100 percent of GDP... [a] fiscal gap... around 3 points, not trivial but hardly something that should have been impossible to close.... So yes, Greece was overspending, but not by all that much. It was over indebted, but again not by all that much. How did this turn into a catastrophe that among other things saw debt soar to 170 percent of GDP despite savage austerity? The euro straitjacket, plus inadequately expansionary monetary policy within the eurozone, are the obvious culprits. But that, surely, is the deep question here. If Europe as currently organized can turn medium-sized fiscal failings into this kind of nightmare, the system is fundamentally unworkable.