"4a. Germany has a choice. Accept huge indirect public claims on Italy and Spain, plus a drastic revision of strategy — basically, to give Spain in particular any hope you need both guarantees on its debt to hold borrowing costs down and a higher eurozone inflation target to make relative price adjustment possible; or:
4b. End of the euro."
I am sick and tired of hearing people say things like "Keynesians don't care about microeconomic factors" or "Keynesians don't think about relative price adjustments". It's wrong - it's simply wrong. If you hear it from somebody they're either ignorant or they have an ideological axe to grind. And the latter case usually has a hefty dose of the former anway.
The whole problem with depressions and liquidity traps in particular is that relative price adjustments can't be made. Right now every relative price adjustment just twists the knife that the financial crisis plunged into effective dmand.