Financial Chaos without European transfer payments?

When even seasoned financial commentators that usually display a certain amount of independent thinking argue that financial chaos is certain if Germany (and other 'northern' Euroland member states) don't continue to subsidise countries such as Greece, Ireland and Portugal one knows that the last vestiges of rational economic thought and any sense of democratic governance and financial responsibility is on the way out. Letting Greece or any other country go bust would certainly create difficulties in the short-term but the humongous financial resources (including central bank money created ex nihilo) would be much better applied to paper over the cracks in the financial system. In the long run this would be cheaper for the 'North' and the 'South' would either learn the lesson of good housekeeping once and for all or continue to slide further down the slippery slope of relative (and maybe absolute) decline in living standards.