Magnetar bursts can be emitted by Alfven waves growing in the outer magnetosphere to nonlinear amplitudes, $delta B/Bsim 1$, and triggering magnetic reconnection. Similar magnetic flares should occur quasi-periodically in a magnetized neutron star binary nearing merger. In both cases, fast dissipation in the magnetic flare creates optically thick $e^pm$ plasma, whose heat capacity is negligible compared with the generated radiation energy. Magnetic dissipation then involves photon viscosity and acts through Compton drag on the plasma bulk motions in the reconnection region. The effective temperature of the resulting Comptonization process is self-regulated to tens of keV. The generated X-ray emission is calculated using time-dependent radiative transfer simulations, which follow the creation of $e^pm$ pairs and the production, Comptonization, and escape of photons. The simulations show how the dissipation region becomes dressed in an $e^pm$ coat, and how the escaping spectrum is shaped by radiative transfer through the coat. The results are compared with observed magnetar bursts, including the recent activity of SGR 1935+2154 accompanied by a fast radio burst. Predictions are made for X-ray precursors of magnetized neutron star mergers.
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