Why Greece is so crucial and all the EU is wondering how to save it?

The answer of question in the title is very simple - because of other bankrupted countries. If Greece is to default it will bring losses to bailout funds, backed by other governments. This will lead to an entire destruction of the funds, as no one will agree to lend money that will not be repaid back. It is not a loan, it is a gift.

Among donor-countries there is a great discontent of saving indebted governments. By now there is no official losses for bailout funds. Formally everything is just lending loans, that in future will be repaid. Even the restructuring of Greek debt that happened did not include foreign aid, but the cut was only for the private debt.

In fact Greece can not repay its debts - neither the private part, not the bailout money from EU and IMF. So when Greece goes default, these lenders will sustain losses. As the taxpayers will not agree on further losses, so the bailout funds will stop functioning or at least - will decrease their activity. Then the next problematic countries will become without money, even if they are ready to repay everything.

So at the moment, the only thing that EU is doing is to keep alive this Ponzi scheme. It they have not interfered 3 years ago, Greece would just default and the losses would be for private lenders. That is how it must be, as every lender must take responsibility of its own decisions. By nationalizing the Greek debt and making it a debt to public lenders, EU created another problem - much deeper that the initial one.

So now EU can only pay - even when Greeks tell officially they will not repay the money back... :)

May 10th 2012

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