I found this discussion paper by Stergios Skaperdas offered a useful perspective on the crisis. Here is a passage on default:

If Greece had defaulted in early 2010 Greek debt could have become sustainable in the long run with a writeoffs imposed on bondholders of considerably below 50% of total debt. The country would have had to borrow internally, perhaps issue IOUs (as it has done already), and impose a few modest cuts. The effect of such a policy would have been mildly recessionary.

What was done in 2010 instead by the troika was to provide Greece with loans so as to cover its budget deficit without default, in exchange for increasingly draconian budget cuts, tax increases, and institutional changes of dubious value. The effect of this policy was a fast downward spiral of the economy. Since debt kept increasing and the country kept getting poorer fast, debt was becoming ever less sustainable. Thus, the second bailout in 2012 restructured Greek debt, with the main losers being Greek pension funds and Greek banks. The Greek state had to borrow 50 billion euros just to recapitalize the banking system and continues to have to cover the losses of the pension funds (in addition to cutting pensions, cutting health expenditures, and increasing retirement ages). The continued contraction of the economy, deflation, and a few additional loans from official sources have brought the debt-to-GDP ratio close to 180%, the highest it has ever been.

Now, default would be considerably more difficult both because Greek public debt is under English law and because 80 percent of it is official and owed to official sources (the IMF, the ECB, and other Eurozone member countries). Yet, that debt is unsustainable and there is virtually no chance it will be fully paid back. Default is still a taboo but it is bound to occur in one way or another, regardless of how it is named.

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