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They did default. It was the biggest default in history. But it happened 3 whole years ago so I get why people forget about it. The interest rate on their curr

They did default. It was the biggest default in history. But it happened 3 whole years ago so I get why people forget about it. The interest rate on their current debt is extremely low (2.6% of GDP, with a debt/gdp ratio of 175%), and if they ever decide to make some serious structural reforms and start growing again, the debt/gdp ratio can be brought down to very manageable levels. If they reach their pre-cris GDP high their debt/gdp would be ~120%, which is high but reasonable and easily repayable given continued growth.

meric 12y ago
Exiting the EU and setting up their own currency so they can control their own interest rate to limit capital inflows that caused the over-spending and malinvestment in the first place would be a serious structural reform I would like to see them to undertake. The last default wasn't sufficient in cleansing the situation, most of the debt was rolled over only with new terms. The previous GDP high was only because of excessive capital inflows causing malinvestment and overconsumption - it would be akin to your bank lending every member of your family including your children $1,000,000 at 0% interest rate. Some of you may spend it irresponsibly and they would be the ones who spend the most. This increases your household spend making you look richer than you are. In the end the bank isn't getting their money back because you just don't have enough $1,000,000's left because it was spent on new clothes and expensive cars. Your family isn't going to ever get back to pre-crisis spending high, even given continued growth in your family's income, and especially not if you have to continue to pay interest on that debt.
Ntrails 12y ago
They did not default. It was a voluntary "haircut" if I remember the rules aright. Which is to say everyone had to agree to get less money back but the credit default swaps were not triggered. One hedge fund at least did not sign up to the haircut and got full face value back by playing chicken on whether they'd defaulted.

meric 12y ago

Exiting the EU and setting up their own currency so they can control their own interest rate to limit capital inflows that caused the over-spending and malinvestment in the first place would be a serious structural reform I would like to see them to undertake. The last default wasn't sufficient in cleansing the situation, most of the debt was rolled over only with new terms. The previous GDP high was only because of excessive capital inflows causing malinvestment and overconsumption - it would be akin to your bank lending every member of your family including your children $1,000,000 at 0% interest rate. Some of you may spend it irresponsibly and they would be the ones who spend the most. This increases your household spend making you look richer than you are. In the end the bank isn't getting their money back because you just don't have enough $1,000,000's left because it was spent on new clothes and expensive cars. Your family isn't going to ever get back to pre-crisis spending high, even given continued growth in your family's income, and especially not if you have to continue to pay interest on that debt.

Ntrails 12y ago

They did not default. It was a voluntary "haircut" if I remember the rules aright. Which is to say everyone had to agree to get less money back but the credit default swaps were not triggered. One hedge fund at least did not sign up to the haircut and got full face value back by playing chicken on whether they'd defaulted.