...What if the ECB/IMF/Federal Reserve cleared their respective commercial banks of toxic PIIGS debt, then immediately revoked all stabilization, loan and bailout packages to stricken countries? This would effectively sterilize the risk of contagion to America and broader Europe, which is the number#1 threat to fragile global banks, while simultaneously imposing hardcore austerity on the laggards. The logic here is the ensuing bank panic and credit freeze is much worse than the default itself. Actual losses and exposure uncertainty forces banks to curtail lending, both in the money market and to the private sector, which reduces money supply many times that of the actual size of the default. So, if the goal is to protect the global banking system against collapse, the cancer ought to be isolated then cut out. Right now, Central Bankers are rewarding both the reckless borrower and lender, putting the entire system in jeopardy. How am I wrong?