How to Save Greece

Greece is a chronic defaulter. Since winning independence from the Ottoman Empire in 1832, the nation has spent half its time in various stages of default or restructuring. At one point in the middle of the 19th century, Greece was in default—meaning out of compliance with debt obligations—for 53 straight years, according to by economists Carmen M. Reinhart and Kenneth S. Rogoff.

If Greece defaults again, this time really will be different. The finances of the world are linked more tightly. Derivatives obscure and sometimes concentrate risks. Greece is locked into a single currency with 16 other nations. It's possible that the global economy could get lucky, and a Greek default will be a minor event. But it's also possible that a default would cripple a chain of vulnerable economies, including Ireland, Portugal, and Belgium. The nightmare scenario: defaults by Spain and Italy, which might thrust all of Europe into a deep recession.