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Originally Posted by Vexx
Greece seems to be having a "California"-ish problem. They need to tighten their economic belt... but the middle and working classes are pissed because the pain is not being shared equally (from what I can tell from afar). Its the classic class of the rich getting to tiptoe around the problem (often caused by their decision-making) while the masses take the pain. OTOH.... I'm getting the sensation that the average citizen may be unwilling to take *any* personal pain to solve the problem, so the entire country looks a bit like a "don't wanna" tantrum. Hard to tell through media filters, the US corporate media is horrendous on the topic and the BBC/DW reports aren't really doing much "why" analysis, just reporting on the fracas.
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The best article I've read so far on this topic is actually from the WSJ. It really explains the issue in a clear manner.
http://online.wsj.com/article/SB1000...153415820.html
In short: German and French banks own a large part of the Greece debt and in case of a default stand to loose $120 billion. The Greek government faced with strong popular opposition is trying to negotiate a deal is acceptable to both the other European countries and their people. The German government is playing hardball in the negotiations as a result of home election pressure, they can't afford to be seen as soft.
If Greece were the only vulnerable country there would not have been such a big problem. Unfortunately there is a contagion risk that could cause Portugal, Ireland, Spain and Italy to come under pressure as well. That's why Europe and IMF are very likely to try everything to prevent a Greek default, even if only delaying it by one or two years. Should things go wrong and market speculation causes more defaults then many European banks will fail. We are talking about a cost along the lines of about 25-50% of subprime mortgage crisis so it could have a global impact. The IMF is very active in attempting to shore up Greece as I doubt Washington would like to see a second round of bank bailouts.
The Greek government in the mean time has some space to negotiate terms as they are aware that other countries have a strong incentive to help them out of a sense of self preservation. Needles to say this has resulted in a hate frenzy against Greece in the popular press.