Greek Bankruptcy is Desireable?

In an ideal world Greece should be allowed to go bankrupt as only prolifigate Greeks and iresponsible lenders would in fact be damaged. Yet, unfortunately there is a market failure to understand that a government, bank, or company using euros can be allowed to go bankrupt without damaging currencies such as the dollar or the euro.

Undoubtedly, ill informed markets would regard a Greek default as endangering the euro. Yet in reality bankruptcy can force necessary change, in government, a bank, or a car producer without damaging the currency it uses. Indeed an economy or financial zone can be strengthened by a weak element being forced by bancruptcy, or its threat, to radically restructure expectations and expenditures. In the long run the economic impact of bankruptcy can lead to a healty reassignment of economic resources, or change in management.

Nevertheless, given the present lack of sophistication in financial markets; it is probably necessay to protect confidence in the euro and, subject to strict conditions, bail out the Greeks. This will cause difficulties, but no sympathy should be extended to profigate Greeks or their foolish financiers. Indeed the latter have already recieved more than adequate compensation for any risks they incurred in the high interest rates they charged, and the former have already benefited from living beyond their means.

Refs:
http://community.nytimes.com/comments/www.nytimes.com/2010/04/24/business/global/24drachma.html?sort=oldest&offset=1
http://www.economist.com/daily/news/displaystory.cfm?story_id=15980711&fsrc=nwl
http://news.bbc.co.uk/2/hi/business/8639440.stm