Greece Crises : Is default the only option?
Summary: The debate over "Greece sovereign debt crises as a tragedy or opportunity" has varied viewpoints. I believe that under the circumstances given in the case, it was not right to default by Greece on external debt as there were other measures such as total factor productivity through which we could reduce the fiscal deficit and convert it into fiscal surplus similar to the rest of the European union.
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Main arguments in favor of the Greece not to default:

1. Penalties for sovereign default: There were provisions for penalties if a country defaulted on its external debt such as exclusion from further borrowing for some time, downgraded credit ratings and inability to borrow in your own currency.

2. Decrease in Labor productivity and TFP : From Exhibit 1, we can see that Total factor productivity and labor productivity declined from 2000 to 2010. This means less output was received per worker. Moreover in Greece, the companies were nationalized after 1981 and monetary policy was under direct political control. This could be reverted by liberalizing the economy. It could also be reverted by increasing the total factor productivity by reducing employee compensation & social benefits. The Exhibit 1 shows that there was no reduction in employee compensation & social benefits since 2000-2010. The comparison of unit labor cost indices from Exhibit 2 also shows that labor was more expensive in Greece than in Germany. This could be reduced to gain competitive advantage in exports of services such as shipping & tourism.

3. High bond yields before joining EU : From Exhibit 3, we can see that after joining EU, the Greece was considered more safe investment destination because bond yields declined. But before 2001(before joining EU), the bond yield for Greece was higher as