The Greeks are catching a lot of flak at the moment for their massive national debt problems, but most of the countries giving them grief should look in the mirror. They might notice their own debt is massive as well. Given this, why are the willing to help the Greeks?
The numbers from Greece are not good when it comes to measuring the national debt in the country. The deficit is a shocking 12.7 percent of the countries entire economic output. This is a huge number and is making buyers of debt very hesitant to provide the assistance that Greece needs. This is multiplying the problem and forcing an already stressed Eurozone to step up and promise assistance. The promise, however, is a very interesting one. Why? It is coming with a brutally blunt set of demands. Greece must slash government spending and raise taxes before the countries of the EU will kick in to help it.
Why not let Greek default on its debt? The answer is found in Asia in the late 1990s. Thailand had built up a huge real estate bubble [sound familiar?]. It eventually went bust and nobody stepped up to help. The general view was Thailand was a small player in the economic world and it wouldn't have a big impact. Wrong. The economies of Asia were tied together in obvious and less obvious ways and the countries of Southeast Asia were all severely impacted. Currencies lost much of their value, which is why vacationing there is so utterly cheap. Given all this, the EU is not about to watch Greece go down the tubes.
The situation with Greece bears watching because it is not the only country in the world that is suffocating under massive debt. The real question is how long countries will continue to bail each other out as we move forward and the bill for all this government spending comes due. It is not going to be pretty.