As Paul Krugman notes, Argentina's dropping the dollar peg, equivalent to a Grexit,and did not cause widespread economic devastation, it was the flailing around and uncertainty before making the break
Only a day after grim predictions of financial and social collapse in Greece, a scramble appeared underway to work out the details of a new bailout package to bring the country back from the brink of falling out of the euro.Greece's debt has been unsustainable, and when /the previous government doing what was demanded of it by the Troika, it caused the economy to implode, driving debt higher, both on an absolute basis, and on a debt to GDP basis.
As details of the new offer emerged, it appeared that Prime Minister Alexis Tsipras was capitulating to demands on harsh austerity terms that he urged his countrymen to reject in the referendum last Sunday, like tax increases and various measures to cut the costs of pensions.
But Mr. Tsipras sought a three-year bailout loan totaling 53.5 billion euros (about $59 billion) and asked creditors to commit to discussing restructuring the nation’s massive debt. The amount was more than it would have been without a nationwide banking shutdown that has pummeled the economy. If granted, it would come on top of 240 billion euros in bailout loans Greece has received since 2010. Mr. Tsipras seemed to have gained ground on debt relief, his one bedrock demand. Germany’s finance minister, Wolfgang Schäuble, finally gave a little on that Thursday, admitting that “debt sustainability is not feasible without a haircut,” or write-down of debt, even if he then appeared to backtrack.
This is a f%$#ing disaster, not just for Greece, but for the Euro Zone.
It's clear that Greece is going to leave the Euro under these terms, and when the Greek new Drachma era shows the kind of explosive growth that Argentina did post dollar peg, there will be a clamor among the southern tier of the Euro Zone to reestablish their own currency.
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