Ed Harrison at Credit Writedowns gives us a very credible plan for Greece to exit the euro, and why Italy can’t, with scenarios. I agree with his assessment of the Italian situation and think the ECB will eventually have to put a ceiling of something like 3% on Italian debt, which will give them a surplus over time (a few years) and avoid a catastrophe. But Greece has to exit first to make that politically acceptable, unless they want to really see riots and serious devastation in Greece, as Greece would be really pissed (a technical term) if they did it for Italy and not for them, while they were still in the euro. Buiter is right that the New Drachma will devalue sharply. I think 30% is likely, and we could see 50%, depending on how much the Greek central bank prints. Thought: Greece is using this “crisis” to cut government spending BEFORE they leave, so they have less need for deficit spending after drachma conversion; otherwise, why go through this?