Greece

First a caveat; I don't claim to understand the Greek situation, but for some reason it's bugging me. There is little likelihood that Grexit will have a big impact on the US and we have other things to worry about in California: fire (too frequent) and water (not enough), not to mention gun violence, racism, decaying infrastructure, expensive health care, declining educational standards. But although it's a small country, about the population of Ohio, with a GDP equivalent to 1.7% of the US (roughly equivalent to Louisiana), I am transfixed.

Here's my take. When Greece joined the Euro, its government was able borrow money from private lenders at very low interest rates. They were prepared to lend at rates that didn't reflect the risk of Greek sovereign default in part because the government cooked the books on its tax receipts, and in part, I'm assuming, because they calculated that the EU would not let the Greek government default; that would put lots of European 'too big to fail' institutions in peril.
When Greece's finances began to look shaky, interest rates on Greek debt soared, and default looked likely, the IMF, the ECB and the EU then stepped in, bailed out the private lenders to reduce the risk of contagion (exactly as those lenders predicted) and, in return for lending European tax payers money to the Greek government, asked for a repayment plan, one based on 'austerity' (meaning a drastic cut in government spending and the privatization of state owned enterprises).

It seems that some of this plan was never implemented: the retirement age was not raised, pension reform was neglected, privatization proceeded at a snail's pace, and tax collection wasn't improved. But government downsizing did lead to a severe contraction in economic activity, lowering tax receipts still further and prompting another bailout. With it came more pressure for reforms and government spending cuts, leading ultimately to a soft 'revolt' by the people who, in 2015, elected an anti-austerity government led by Alexi Trsipras. Trsipras' Syriza party came to power promising to undo austerity, something it really had no way of knowing it could deliver.

Over the six months of rancorous negotiation and increasingly hostile rhetoric, Trsipras and Yanis Varoufakis, Greece's finance minister, failed to get the concessions they had promised their voters and in a desperate move, called referendum on the austerity deal which, perhaps not surprisingly, the Greeks rejected, in effect tying Trsipras to the mast of his electoral ship.

By now, private lenders were largely off the hook so 'contagion' in the banking system was mitigated. But that meant that instead, European tax payers in effect were backing Greece through the IMF, the ECB and directly through (I'm assuming) Greek debt purchases made by European governments.

In June an IMF repayment deadline came and went with out visible consequences; in early July and ECB deadline (it had promised not to renew it's prpovision of funds to the Greek banks were a deal not reached) passed and funds continued to be provided. So a big bang (much like the passing of the US debt ceiling) went off with hardly a sound, making all the dire warnings look like posturing and negotiating. What people say they will do and whey they actually do when push comes to shove often seem to differ.

So where now? For one thing, despite the artificially whipped up emotional indignation of "being cast out of Europe" there may be benefits to letting the Greek currency float again. Import substitution should create jobs and the economy, after some period of inevitable chaos, should recover. That may give Greece some breathing space to decide for itself which path it wants to take - reform or economic stagnation and collapse. But at least that won't be a solution imposed on them by outsiders.