Defaulting on Loans

With the troubles that some European countries are having, it seems that some (many, most?) supporters of the free-market are urging those countries to default. See for example Tim Worstall in his post today about Greece. Now, these guys obviously know a lot more about economics and philosophy than I do but the question occurs to me that surely defaulting without repercussion is not in line with free markets?

A loan implies a contractual obligation to pay that money back. So how is it possible to square a desire to see contracts enforced with the acceptance of defaulting on loans? I could understand if the suggestion was for Greece to default and have her assets taken by others rather than continue on borrowing more and more and making things worse. But the implication is that it would be OK for Greece to simply refuse to pay back the money and yet retain her assets. Her only "punishment" being that no one would lend any more money to her again.