cont.

Heretofore, the countries that joined the euro zone did so with the understanding that they could have the best of all worlds — the convenience of a common currency without the economic and political integration that would inevitably be needed if the countries did not pursue similar economic policies. That understanding was wrong.

For Greece, no alternatives look good. The latest European bailout package does make some gestures toward promoting economic growth, like a program of loans for smaller businesses, and it allows Greece to escape paying some of its debts. But mostly it calls for sacrifice and austerity for years and years. The alternative, with a loss of European support, could be worse. Greece would have to get by on its own resources. It could default on its debt and devalue its suddenly resurrected currency, the drachma. Eventually, that might lead to economic growth, but in the meantime there would still be austerity. Without access to outside capital, Greeks might have to pay for their own government, through taxes. 

The New York Times: Why Not Give Greeks Their Say?, November 3, 2011

The Economist: Greece’s woes, November 5, 2011

Die Zeit: Um Mitternacht entscheidet sich Papandreous Zukunft, 4. November 2011

The Guardian: Greece may leave euro, leaders admit, November 3, 2011

NY Times: Greek Leader Calls Off Referendum on Bailout Plan, November 3, 2011

NPR: What Would A Greek Default Mean To Europe?, September 21, 2011