One for Bernard, accredited to BoA, the Australian financial sector is now , by market cap, larger than that of the entire Eurozone. Thankfully  Australia is the lucky country, with these institutions indefinetely supported by China et al. Too large to fail.

" whereby austerity reduces spending and the size of the economy, thus increasing the relative weight of the same debt pressing down on a smaller economy"
While on the surface this appears correct.  In reality it is somwhat different.   
 
It principly reflects that the people directing the Greece economy are idiots and incompetent in their job.
 
Without Austerity measures (ie when they had this "big pumping economy") they were driving their debt guzzler faster into the brick wall.  They were accelerating.  The point of austerity is not to make the debt smaller, but to applying braking forces - a braking force that would not be required if their original plans and philosophies were acceptable.
  This "Relative weight" has always been there, just they were borrowing to cover it up before.  Now they can't.  Like someone who has several Credit Cards and has been using one to pay off the others.  Suddenly not having money for things when payoff time arrives, doesn't mean you had money before;; it means you've always been spending beyond your means.

The next step for those idiots, is to work out which "Shooting Stars" actually result in wealth growth.  eg what can be exported, what can be traded, what wealth can be invested by capital works (eg labour and time to improve productivity on farms, and infrastructure....without any borrowing.  What improvements can be made for fuel and heating and lighting (energy _needs_ , as opposed to streetlights, festivals, or internal consumption paid for with debt) as reducing the cost of production _per_unit_ without borrowing externally, increases the yield from any product produced.
  An internal trades-based training (all career paths, not just traditional trades) and apprenticing (master & single apprentice) at low wages or work for food, instead of modern borrow for university & selling edutainment certificates, will result in an experienced and highly productive workforce.
Also designing smart philosophies around population centers will help.  Subway systems cost a fortune and can only be done in upswings.  Decentralisation results in higher fuel, machinery and roading costs.  Work at putting efficiency into training and business investment subsidies to get employment and skills "near to where they're planted" to reduce overhead.  Built systems that use people, not the purchase of expensive machinery.  1000 employed people with bugger all wages does more for your economy than 10 technicians watching a machine.
 
Just because they can't handle austerity doesn't mean it doesn't work.
Perhaps they also need to study how German survived it's war reparations & came to be the financial powerhouse of Europe in under 70 years - after having major parts of it's infrastructure destroyed and mostof it's trading partners hating it politically.

This is an interesting observation from Charles Hugh Smith;
.. the steady erosion of faith in the U.S. stock market is striking: as noted last week, 80% of the trading is either invisible, officially sanctioned manipulation or computers trading.
If the U.S. legal system weren't hopelessly compromised, the U.S. stock markets would be shuttered as corrupted beyond redemption.
http://www.oftwominds.com/blogaug12/credibility-expectations8-12.html
 
Interesting stat but then I could never figure out the fascination with pokie machines either.