If the intent is never to pay at the moment the loan is made, then it's fair to consider that fraudulent. But a loan isn't a guarantee - that's impossible. Bu

If the intent is never to pay at the moment the loan is made, then it's fair to consider that fraudulent. But a loan isn't a guarantee - that's impossible. But situations unfortunately change. You can wait for default, but if you truly believe that the load has gone bad, it may well be better for both parties to renegotiate. If at that point you don't intent to pay the full original loan back (or as lender don't expect to receive all of the principal plus interest), that just means you're not delusional. Back in the specific case of Greece, I think it may well be that the loan was taken in bad faith. But even though previous Greek governments committed fraud that doesn't mean anyone's better off now kidding themselves about the chances they'll pay. Frankly, I'd argue that official lender's are already effectively forgiving loans by subsidizing indirectly via unreasonably good loan terms. No commercial entity would have given loans like the IMF and ECB have; they're worth far more than greece is paying. The question is then whether you're better off pretending that you are lending X principle at terms Y, or bookkeep that as the equivalent lending some fraction of X at fair-market terms Z. Even if greece can keep to the letter of the current deals, that's equivalent to having probably the majority of its debt forgiven, and the rest generating fair market returns. It's just politics as to why that's not publically admitted - northern European voters might go bannanas. The downside is that the current situation might contribute to European instability, because southern Europe (and especially Greece) really believes they're paying all that unsustainable debt, when in fact, they aren't not really, not even today.