'Show Some Mercy'

Greg Mankiw:

... In an earlier era, Greece could have devalued the drachma, making its exports more competitive on world markets. Easy monetary policy would have offset some of the pain from tight fiscal policy. Mr. Friedman and Mr. Feldstein were right: The euro has turned into an economic liability that has exacerbated political tensions. For this, the European elites who pushed for the currency union bear some responsibility.

As creditor nations and international institutions sort through the wreckage, it is worth bearing in mind the lessons from Mr. Keynes. A nation can only withstand so much economic pain before the political fallout becomes ugly. And that fallout can extend beyond the border of the problem nation.

Yes, the Greeks have every reason to be contrite. But it might also be wise for the rest of the world to show some mercy.