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NEW YORK "“ Nothing illustrates better the political crosscurrents, special interests, and shortsighted economics now at play in Europe than the debate over the restructuring of Greece's sovereign debt. Germany insists on a deep restructuring "“ at least a 50% "haircut"� for bondholders "“ whereas the European Central Bank insists that any debt restructuring must be voluntary.

In the old days "“ think of the 1980's Latin American debt crisis "“ one could get creditors, mostly large banks, in a small room, and hammer out a deal, aided by some cajoling, or even arm-twisting, by governments and regulators eager for things to go smoothly. But, with...