Do you understand the last 2 rounds of loans to Greece were bailouts provided by other EU countries?
As opposed to the EU directly. Which is what is supposed to happen under the treaty. The reason it was individual countries rather than the EU directly is because the Germans blocked the use of EU funds, because it runs contrary to their constitutional principles. So we get this awkward half-way house whereby the deals are done by individual countries on a peicemeal basis, rather than fulfilling the obligations under the treaty.
Do you understand that these loans were provided based on a commitment Greece made to get its fiscal house in order?
Which it is doing...
Do you understand that Greece's debt-to-GDP is way above allowable EU levels?
So are many countries in the EU, including Italy, Spain, and if you discount some of the accounting tricks the UK government plays with PFI schemes, the UK.
Do you understand that if Greece blows off the countries that bailed it out last time and returns its budget to massive deficits there will be no additional bail outs in the offing?
Do you understand that if Greece in unable to borrow from the people that bailed it out last time it likely won't be able to borrow the money required to fund its massive deficits?
Because these are relatively important things to understand before saying what Greece should do.
Sure, but you're only looking at half the picture. What's happening is that the Greek government is threatening the Eurozone. They're saying that another 20-30 years of austerity and zero growth is unacceptable to the voters, who have literally been rioting in the streets. So either they get better conditions from the EU than they have gotten so far, or they exit the Euro. Those are the choices.
Both have their attractions. Better terms would reflect the reality that not only is the EU bailing out Greece, they are also bailing out the Euro itself. At stake is the principle whereby Eurozone countries are part of a broader and stronger entity that supports it's members. If Greece goes, Spain would be next, as the fundamentals are not noticeably any better there, and Italy shortly after. The euro itself could collapse at that point, and certainly the idea of 'ever closer fiscial union' would be shown to be a sham. This would involve Germany accepting the idea that the EU involves moving money from richer to poorer countries, something that has always happened, but never so blatently or directly as now.
The alternative is a Greek exit from the Euro. This would seriously hamper Greece's ability to repay, and they may simply default - a normal business risk, but one which reflects more badly on the EU as the guranntor, than Greece as the borrower. A lot would depend on who took a bath and how it was structured. However, it would also allow Greece's currency to crash, focusing spending on domestic produce and making it a vastly more attractive target for the main sources of income - tourists, and shipping contracts. Savers and bondholders would take a massive hit, and Cyprus would be in serious trouble, but growth would be stronger.
Greece would probably be better off, on paper, staying in the Euro if it can. But the idea of spending the next few decades paying off the mistakes of the previous generation, purely so that bondholders don't have to write down their investments and so that the Eurozone can pretend it stands behind it's members, is entirely unacceptable to the people of Greece, and rightly so. This is precisely why we have bankrupcy and similar proceedings, so that people can't get locked into debt slavery.
So Greece has finally, as it has been threatening to do for years now, elected a government with a clear mandate to sort the situation out, one way or another. In effect, they either get better terms or declare bankruptcy. This is highly inconvenient for bondholders, and those with a vested poltiical interest in keeping the Euro afloat, but it's normal business practice throughout the western world. It's how the system is supposed to work.
