First, the obvious one, that the eurozone, or even the larger EU isn't a single country. HEck, it's not a single economic polity, even. If it were, perhaps Germany would take the lead in a 1990s Sweden-style nationalization of some of the banks, which would trump both current EU action and US action four years ago. But, without at least a true single economic polity, Germany can't nationalize Spanish banks, and it won't float the money for Spain to nationalize its own, I'm sure.
Sinn then raises the "moral hazard" issue with a name from American history guaranteed to strike at U.S. Republican-Democrat issues:
When Secretary of the Treasury Alexander Hamilton socialized the states’ war debt after the Revolutionary War, he raised the expectation of further debt socialization in the future, which induced the states to over-borrow. This resulted in political tensions in the early 19th century that severely threatened the stability of the young nation.Sinn notes that several U.S. states went bankrupt in the 1830s and 1840s because of this. (As did the independent Republic of Texas, or nearly so. Part of its "price" for annexation (the threat to become allied with Britain was bogus) was U.S. assumption of its debts. So, any time you hear a Texas Republican talk about fiscal discipline, he's probably full of shit.
Third, Sinn says it would be unconstitutional for Germany to do a true bailout of Spain. (That's no never mind to U.S. leaders who don't respect our own constitution.)
Finally, though the initial comparison is apples and oranges anyway, Sinn says Greece has gotten 105 Marshall Plans from Germany already.
I don't totally agree with all Sinn's arguments, and don't know that, if the eurozone were at least one economic "country," if he and most Germans would support a Swedish move.
That said, Germany could leave the eurozone instead of trying to boot out Greece. Would probably change its relations with Russia and Eastern Europe at least as much as with Western Europe.
And, while "austerity" isn't the answer ... maybe Germans are right to worry about overcommitment. If the likes of a Krugman favors massive Keynesianism across borders, within the eurozone "project," does he think Germany is, in turn, entitled to some "guarantees"?
Some "collateral" from Spain, to use a banking term?
I kind of do. And, I'd like to see Krugman address this issue. I think it's a flaw in his thinking.