Politics
Simon Jenkins of the UK's Guardian gets the political incentives of the Greek debt crisis very, very right. Just the same, I think that a major Greek fiscal consolidation is going to happen regardless. The question is who else (other than the Greek people) will get hurt as the Greek government tries to prune the state back to sustainability and how it deals with its existing debt.
I especially like this:
The lesson is clear. Sovereign states with distinct political cultures should never surrender control over internal affairs to foreign agencies unless their people are amenable to such a loss of autonomy.
The main reason that Greece's political problems are a more-than-local problem is that the eurozone (as it developed) was less a deeply flawed economic policy (though it was that too) than a geostrategic policy whose primary purpose was to advance a deeply flawed conception of the EU project.
By folding the semi-developed economies of Southern Europe into the eurozone, the EU (meaning primarily its more-developed core members such as Germany and France) in effect gave the southerners a credit card they just weren't prepared to handle. Now the party's over and the hangover hurts like a sonofagun.
Bad as the economic troubles are, a worse danger is the possibility that discontent and unrest over austerity measures could spill over and destabilize political systems (Greece, Portugal, and Spain, let us recall, are "young" democracies of only a few decades' vintage).
So far I don't see much of that going on--ruling parties have been changed at the ballot box, but that's a sign of systemic functioning rather than systemic instability.
That the EU represents an excessive centralism unsuited to Europe with all its local differences of history and circumstance is something more and more people seem to be coming to realize, and that's the silver lining here.
Just to add two cents,
like Race Bannon mentioned about the hefty Franco-German credit card, that is one of the key problems (and flaws) faced by the European Union, and the countries of the Eurozone more specifically.
Even though the countries of the Eurozone surrendered their ability to set their own monetary policy, they still retained their ability to set economic policy.
As a result, you have two basic problems.
1. There are 17 independent economic policies for ONE monetary policy.
2. If you are going to establish a stable monetary policy with a strong currency, you need good creditworthiness. So, you base that off of the strongest members (France and Germany - like Race mentioned above).
The end result is that the world absurdly continued to lend Greece money based upon German and French credit and using that money to execute their own ludicrous economic policies.