Greece is what a post peak oil world looks like. Low paying jobs. Smaller and then no pensions. Less and then no health care. Fewer and then no public services. Everyone angry and blaming something except the real issue: falling per capita net energy.
Imagine medieval Europe. That’s our destination, at best.
Krugman and others are saying that forcing Greece to increase taxes and reduce expenditures will make things worse. Instead they think Greece should be able to print money to pay their debt on the assumption that a devalued currency will increase exports and thus solve the problem with economic growth.
This may have been a valid strategy prior to peak oil, but not now. Growth is no longer possible. This means the Greek standard of living will continue to fall regardless of government or central bank policies.
Given this reality, a country can choose to reduce incomes and wealth with deflation or inflation. I prefer deflation, but reasonable people might prefer inflation.
That’s the essence of the Greek referendum: Do you want to get poorer with deflation or inflation?