1)let them default
2)make the bond holders take a haircut, meaning they will get less
3)guarantee the loans to persuade banks to rollover the old Greek bonds and buy new ones
The outgoing Bundesbank Chief, Axel Weber, recommends that Germany take the third option. It is the only one that makes sense from the economic point-of-view. He understands that it will be difficult for Merkel. The “push-back” effect, the popular resistance, in places like Germany and the Northern Tier of Europe is extreme. To make sure that the same situation doesn’t reoccur in the future, Weber suggests that bonds of the future should have clauses that if a country needs a bailout, the bond holder will be willing to take losses.
What I say is that if Germany is serious about the euro, it must step up to the plate and take responsibility for its currency union.