I have a very naive question: What is the problem with letting these LGFV fail and debt disappear with them over a few years? My understanding is that it would

I have a very naive question: What is the problem with letting these LGFV fail and debt disappear with them over a few years? My understanding is that it would create a bit of inflation but the volume would be manageable and inflation is not much of a problem in a growing economy. LGFV do not look like a financial product that can be bought so there does not seem to be any risk of contagion. This is all government matters so the moral hazard can be easily avoided if the government is willing to punish harshly the officials that put their cities in this situation. Financial punishment is not the only way to punish unwise risk taking.