the only sane choice is to accept the logic of the currency union they created and the obligations that go with it. In the medium term, that means closer fiscal union. In the immediate term, it means one thing above all. The European Central Bank must be granted whatever powers it may need to underwrite public debts across the EU.
Not exactly the outcome that the Germans are looking for.
In our lifetimes, these sorts of crises have occurred in countries that were not the most advanced in the world, although they weren't the poorest, either. I am thinking of Latin American countries in the 1980s and some Southeast Asian countries in the 1990s. The resolution took place under the supervision of the IMF. The countries had to impose austerity measures, the creditors had to accept write-downs, and the IMF took over the role of lender to the government. For the troubled country, the deal was you gave up some sovereign autonomy in exchange for being able to continue to function in the world economy.
How does that play out for, say, Italy? Does Europe appoint a "financial control board" to oversee Italy's economic policy? Does the IMF play the same role in Europe that it played in the smaller-country crises?
Incidentally, the new prime minister of Greece will apparently be Lucas Papademos, who was a grad student in economics at MIT around the same time as Krugman, Bernanke, Rogoff, and Kling. Have a nice day, Lucas.