To my point,
Merkel’s view is now that allowing Greece to default is a gift to the Greek govt. that
rewards bad behavior, introduces moral hazard, etc.

The trick is to support Greece and not permit default without using German taxpayer funds and without weakening the credit capacity of Germany.

Hence, the current policy of ECB bond buying,
which accomplished all of the above,
is not inflationary,
carries austerity as it’s prime term and condition,
holds Greece to it’s obligations,
enhances ECB earnings and capital,
and is operationally sustainable,
is likely to continue.

Merkel said that her “entire council” of economic advisers says Greek debt should be restructured, advice that she is not prepared to take. “If we tell a country ‘We cancel half of your debt,’ that’s a great deal,” she said. “Then the next guy will immediately show up and say he wants the same.”