Portugal could avoid Greece's horrible fate if it were to draw the right lessons from the Greek experience.

Attempts at austerity and deleveraging in Europe have converted an economic problem into a political dilemma, with leftist governments rising against Germany's austerity-laced rescue packages. Germany now faces a tough economic decision that will involve choosing between a breakup of the current euro system and a movement toward a common fiscal policy in Europe.

The main problem with the recent IMF programmes to countries such as Greece and Portugal has not been one of size or duration but rather one of policy misdiagnosis. 

An early exit from the euro now would be preferable to Greece going through another few years of wrenching recession only to find later that it did not have the ability to tolerate the rigors of continued euro membership.

If past performance is any guide, one has to wonder whether this will be yet another doleful instance of domestic political constraints, especially in Germany and France, resulting in a "too little too late" European policy response to an ever deepening crisis.

A comparison between Greece today and Brazil in the past is of limited value, due to the number of fundamental differences between the nations' situations.

The economic recessions in Greece, Ireland, and Portugal will become deeper if the IMF and the EU don't recognize that the countries in the periphery suffer from solvency rather than liquidity problems--which are not amenable to correction by fiscal retrenchment alone in a fixed exchange rate system.

There has been much gnashing of teeth and rolling of eyes over eurozone leaders' repeated inability to solve their financial crisis once and for all. The rest of the world can best help, the reasoning goes, by shouting exhortations at Europe to just try harder. But what, exactly, are Europeans being urged to do?