The payback that never comes

As EU countries face the possibility of default, what does it mean for one country to owe another?

As the junior civil servant in the British satirical sitcom Yes, Minister used to say, it's one of those irregular verbs, isn't it? We restructure; you default; Bono wants us to cancel their debts. But of course, everyone would like to have their obligations waived. One wonders why Iceland even bothered to hold a referendum: asked whether its recently nationalised banks should repay their foreign customers at the knock-down interest rate of 3.3 per cent, voters remained reluctant.
Greece, of all the struggling eurozone countries, appears to be spiralling the drain fastest. It is leveraged to the extent that merely making its interest payments would push recovery ever further away. Public calls for debt relief are fierce, and parts of the country are now reportedly ungovernable. Several public officials have been assaulted. In the Athenian suburb of Keratea, locals tore up the streets and police were ordered to withdraw from the area.
When countries owe each other and can't pay, intuitions about what the outcome should be differ sharply, and not only according to which way the sharp end is pointing.
There are, to abuse some terms of philosophical art, two sets of considerations which might be held to apply: consequentialist and deontological ones. Briefly put, consequentialism is the idea that the goodness of an act depends on what results flow from it. For instance (and rather notoriously for the doctrine), there may be cases where it is deemed appropriate to execute someone for a crime they didn't commit, since the deterrent value of execution depends only on perceived guilt and not on the real thing. Deontology, meanwhile, says that there are some things one simply must, or mustn't, do.
The relationship between these two outlooks is tangled. There are, after all, often good consequentialist arguments for treating obligations as though they were deontologically binding - for instance, because it's useful to cultivate a reputation as a reliable partner. Coming at the matter from the other side, there are certain things which might appear only instrumentally useful but which are all the same held by some to be absolutely binding. Contracts fall under this heading, and at the extreme end of the libertarian spectrum there are indeed those who believe that the bond of one's word is all that matters, morally speaking.
One would have to be pretty far gone in that direction to think Europe's sovereign debt dilemma can be resolved with a simple "thou shalt". Most discussion of the way out has been about repercussions, and arguments against default have typically been of the form: "We won't trust you again if you do". That's the consequentialist line which strays closest to deontological territory.
It's also the one which is least often borne out by events. The memory of Mexico's 1994 debt crisis was eclipsed by Russia's in 1998, which in turn faded in the excitement over Argentina in 2002. Life continues, new bonds are issued and the caravan moves on. Iceland's prodigality doesn't even seem to have spoilt its bid to join the European Union. Threats, it's worth remembering, are cheaper than punishments.
We come back to weighing consequences. Yet that alone doesn't add up to a moral system. A good act is one that makes good things happen. Good for who? For me to get free handouts, or for you to get your money back? Unlike those irregular verbs, the idea of goodness tends to cast a haze of sameness over very different propositions.
So here's one last bit of philosophical jargon. Utilitarianism is a version of consequentialism with an extra clause. It specifies that the good which one should aim for is the maximum possible sum of happiness in the world. There's a lot to debate in that formulation, and indeed the debate has been going on since Jeremy Bentham came up with it. I won't wade into that here, or even endorse utilitarianism as an all-purpose theory of morality. I'll only say that when it comes to what one country should pay to another, deciding how to benefit the most people beats quibbling over IOUs.