Over the weekend I was reading Heather Stewart’s article on how default worked for Argentina and might be the best choice for Greece. I think there’s a lot to be said for that argument, but she misses some differences in the situation. In particular, Argentina’s not in a currency union with anyone. If Greece defaults, by contrast, that will put serious pressure on Ireland, Portugal, Spain, and now even Italy is feeling pressure.
Italy doesn’t have a reputation as an economic powerhouse, but it’s one of the world’s top 10 economies with more output than India. For Italy to default would be a gigantic, globally meaningful event with disastrous consequences for lots of people. And that’s why the stakes are so high for Greece. It doesn’t change the fact that default may well be the best choice for the country, but it would be much more momentous than anything Argentina’s ever done. The real lesson, then, is that this really is a continent-wide problem that needs an EU-level solution.