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a. What resources would be given away if the EU through some mechanism that might or might nor include the ECB lent Greece at a reasonable rate, such that 1.the lender(s) would make a decent profit and 2. the Greek budget could sustainably guarantee the eventual repayment of most or all loans, something which is very iffy at this point if the IMF/Eu plan is followed as is.
b. I'm not sure I understand why the issue is Greece, or only Greece, or mainly Greece any longer. There is a sustained attack on both the Euro and the European social model, which started in Greece due to the pathologies of Greek development, in the same way that lions start picking of buffaloes starting from the weakest.
c. Street riots and general societal havoc are more contagious than people think.
d. Unless one defines the "world" as Greece's financial lenders who bet on a losing horse and now are trying to sell it in order not to lose their money, I can't see how the world stands to gain by Greece's default.
e. Greece was following a path this past decade, that was hailed by all, including the EU and the IMF as the correct one, and which led to continuous and substantial growth for a decade and a half. No one, now complaining, disapproved at the time. People who insisted that a debt bubble is no way to build a stable economy were ridiculed or marginalized because they didn't understand the New Ever-Expanding Economy worked. In fact even in late 2009, lenders were ready to lend Greece at very low rates: at 4+ % the debt was easily sustainable.
f. Most Greek citizens have seen precious little of the money involved as any sort of benefit. German arms dealers, Lockheed Martin, Electronics giants (such as Siemens caught red-handed bribing Greek officials, yet still allowed to bid for Greek government contracts), and all sorts of other major corporations, saw much more of it.
g. Greece is an abstraction. It's not Greece that is being asked to pay up. It is its working class. The elites have sent their money to Swizerland, Cyprus, or bought Real-Estate in the poshest parts of London.

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Tue May 25th, 2010 at 05:55:26 PM EST
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d. Unless one defines the "world" as Greece's financial lenders who bet on a losing horse and now are trying to sell it in order not to lose their money, I can't see how the world stands to gain by Greece's default.

Greece's lenders would be hurt by a Greek default like they are being helped by the bailout.

In fact, a Greek default would be a good thing, macroeconomically.

Maybe the EU could declare a debt jubilee. All EU debt would be null and void. Anyone made insolvent by this move would be made whole by the ECB.

Given the amount of circular debt within Europe (where A owes B owes C) the cost of this would be rather smaller than the 200% of EU GDP outstanding as debt.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

by Migeru (migeru at eurotrib dot com) on Tue May 25th, 2010 at 06:00:06 PM EST
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Think of it this way:

If Greece does not get assistance from the EU/IMF, what can its government do?  It can (and I argue should anyway) default on its debt, making its bankers pay for their own bubble-causing decisions.  And it can also leave the EMU, going back to its own currency but in the process possibly threatening the viability of the Euro and to a lesser extent the EU itself, as political institutions.  Given that alternative, it's not unreasonable for Greece to want outside assistance or for others to provide it, but it's also not unreasonable for the providers of that assistance to ask for guarantees of some kind to back of the command over resources that they put at risk by assisting Greece.  So the dynamics of power and collective action kind of limit what is possible here.  The question for non-Greeks is, how much is Greece participation in the Euro worth to us?  For EU citizens it might be more, but for others represented by the IMF it is probably something much less.

by santiago on Tue May 25th, 2010 at 06:06:10 PM EST
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"Its bankers"?

Really, in order to have a discussion, we need to begin from a basic set of facts, such as... 85% of Greek debt is held by foreign banks.

by Upstate NY on Tue May 25th, 2010 at 06:12:24 PM EST
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Which is an argument for default.  Greece should just refuse to pay its bankers, like hundreds of countries have done before, mostly with little negative consequences.
by santiago on Wed May 26th, 2010 at 11:56:52 AM EST
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Many have argued that. But, of course, Greek politicians must really care about EU solidarity and remaining in the euro.
by Upstate NY on Wed May 26th, 2010 at 12:32:10 PM EST
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EU what!?

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Wed May 26th, 2010 at 12:35:14 PM EST
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great diary, talos, it really eviscerates the IMF case, and the hypocrisy, (that the present financial system holds in its very DNA), is laid bare in all its tawdry detail.

capitalism has become a giant press, in which the public is squeezed, screwed tighter by the relentless drive for economic profit in the financial realm.

this iconisation of numbers leads to a terrible degradation of humanity, and Greece is, as Upstate NY so clearly states, just the weakest wildebeeste in the europack, so is the first crucible for what seems to me to be an experiment in pure post-deomocratic oligarchy, supplied with fascist overtones by its bloated fatcat associations with the arms industry and shipping magnate profits.

bankers love war above all, and this looks like a set-up to create one, as history shows us when a country is screwed too far, it lashes out against its neighbours, (as a distraction from its domestic turmoil.)

add that to a surfeit of weaponry and a crumbling social compact and you have the ingredients for massive mayhem.

the banks always win, and never get blood on their hands directly.

thankyou for a thoroughly professional diary, it brings badly-needed clarity to the discussion; the comments are great too.

international capital is remaking the world through creative destruction, whether/how we can live with the results is another story... as greece goes, so will we all, italians are watching this unfold very attentively.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Tue May 25th, 2010 at 06:54:05 PM EST
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It's always the working class, and increasingly the middle class, which is expected to pay up for - what, exactly? Someone else's yacht?

The constant spin and rhetoric are necessary because if they stopped for long enough to give people time to think, the outcome would literally be revolutionary.

Great diary, by the way.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue May 25th, 2010 at 08:43:20 PM EST
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