tomnuttallecon

This is a really good question, and one I've been grappling with lately. As you say, we've been very critical of the austerity-first approach that has governed the eurozone's approach to bailouts, and to a degree its economic governance more broadly. In the last few years Greece has undergone a fiscal adjustment pretty much unprecedented in peacetime, and the brutal effects are obvious in just about any socioeconomic indicator you look at. (Among other things, this helps explain the skyrocketing debt-to-GDP ratio: the denominator has collapsed).

Ideally, we'd prefer a deal that focused on structural reforms to the labour market, better tax collection, a crackdown on oligarchs, liberalised product markets and so forth - and a less harsh fiscal regime. But there's no real alternative to this offer for the Greeks. If they were to leave the eurozone they might well be looking at austerity far more extreme than anything the creditors would prescribe. It's worth remembering that until the second bailout expired last week, the two sides were quibbling over a €7.2bn package, nothing next to the much larger package that is now going to be required. Instead of burning their bridges and achieving nothing, the Greeks should have proved themselves sensible interlocutors, earned trust, restored domestic confidence and then fought for a better long-term deal.

Hi there. I'll take your second question first. You're right that the treaties provide no way of leaving the euro - membership was always supposed to be irreversible. But if Greek banks run out of money and Greece's creditors (the Europeans + IMF) don't provide more help, the Greeks may decide they have to print their own currency to get the banks going again. That's Grexit, regardless of what the treaties say. Moreover, the lawyers in Brussels are quietly working to produce some sort of mechanism that allows a country to quit the euro without leaving the EU, so that a Grexit would be as clean as possible.

I can't blame the Greek voters for seeking a political alternative, even if there were finally signs of some sort of recovery late last year. I can blame the creditors for doing PSI haircuts too late. I can also blame the Syriza-led government for its amateurishness, incompetence, intransigence and its further impoverishment of a country to which it had promised so much.

Believe me, moral hazard is at the very heart of this conversation. It has been throughout the eurozone's troubled years. The Germans and others have always ensured that bailout programmes are tough, and have been happy to see market pressure in the form of rising sovereign bond yields be used for political ends (it was ten-year yields at 7%, rather than his bunga-bunga parties, that did for Berlusconi in 2011). More than getting their money back, the Germans are keen to avoid letting the Greeks get away with violating the rules of the game for fear of what might happen next time. There's a political component, too - Spain and Portugal have been v tough on Greece because they don't want their own voters to get the idea that they can elect a radical-left government that will get its debt written off with impunity.

Yes. Optimism is pretty much a job requirement at the Economist.