He writes,

The European economic and monetary union is doubly flawed. First, it forces diverse countries to live with a single interest rate and exchange rate that cannot be appropriate for all members. Second, combining a single currency with independent national budget policies encourages fiscal profligacy. The Greek situation is a manifestation of these flaws. If European political leaders nevertheless want to preserve the current system, allowing a temporary exchange rate reset for Greece may be the best option.

He says that Greece needs to go off the euro, temporarily, for the same reason that I said it needs to. Greece needs the expansionary effects of devaluation, so that the economy expands while it cuts its budget deficit.

Neither Feldstein nor I address the concern of the effect of a devaluation on banks, particularly in Greece but perhaps also elsewhere in Europe. Tyler Cowen wrote

Talk of Euro abandonment would trigger an immediate run on Greek banks, sending the country into an even deeper hole. Who wants a Euro deposit to be converted into a drachma deposit?