Greece is like an addict. It’s addicted to a socialist economy—lots of jobs, high tax for producers, free this and that for everyone.
The problem is, it can’t pay for what it provides. It lives beyond its means. It borrows money to live.
Now it owes billions. Its creditors, including the European Union (EU) and the International Monetary Fund (IMF) have been lending money to Greece for the last several years—and they’re now hesitant to give more. If they do give more, they want Greece to cut back on its free-spending life-style.
Greece refuses. The current (Leftist) government was voted into office specifically to block creditors from intruding on Greece’s free-spending ways. Yes, Greece needs more money to keep from defaulting on its loans. But it won’t do as its creditors demand.
Greece’s total debt pushes 243 billion euros, or app 269 billion US dollars (“How much Greece owes to international creditors”, Reuters, June 28, 2015). Most of that debt appears to date back to 2010 (ibid). Since then, European governments, the European Central Bank (ECB) and the IMF have granted two major bailouts to keep Greece from defaulting (ibid). Most of the the remaining debt appears mostly to be in Greek-issued government bonds that are held by a variety of European banks (ibid). There appear to be other creditors as well (ibid).
Greece owes a ton of money. It’s got a 1.6 billion euro debt that comes due June 30, 2015. It’s obligated to pay off that debt. It can’t.
Big loans make complex contracts. 269 billion (USD) in loans make extremely complex contracts. No one knows what will happen if Greece won’t or can’t pay that 1.6 billion euro loan.
The best case scenario is, nothing happens. The EU and Greece will come up with a plan. The worst case scenario is, the entire EU economy house of cards collapses.
It’ll be a spectacular collapse. Germany's exposure for the two bailouts totals 57.23 billion euros (ibid). France's exposure is 42.98 billion (ibid). Italy's is 37.76 billion and Spain's 25.1 billion (ibid). Few countries have the ability to cover exposures this large without some sort of economic pain.
This situation is virgin territory for the EU. It’s also an economic minefield. One false step, and something will blow up in somebody’s face.
Now the June 30th deadline looms. Greece says it will hold a national referendum on July 5, 2015 on the question of accepting a bailout that requires belt-tightening. The Leftist government in Greece has reported that it will abide by the results of that vote (Alastair MacDonald, “In? Out? In between? A Greek legal riddle for EU”, Reuters, June 30, 2015).
For now, the EU has declared that if Greece doesn’t accept its bailout terms, Greece could be expelled from the EU (ibid). The Greeks, meanwhile, declare that Greece has no intention of quitting the EU—and cannot be forced out (ibid).
The original EU agreements that created both the EU and the concept called the ‘euro zone’ are clear: there is no provision for expelling a country from either (ibid). Apparently, the only document that discusses a country leaving is one created in 2009. But that only dealt with a country that requests leaving. Greece says it has no intention of doing that.
Also, the underlying concept of EU agreements all focused on stating that, in effect, the euro currency was forever. No one ever dreamed that a member country would ‘break the rules’ (ibid).
(I can’t help making a side-comment here. The EU acts as if G-d is liar when He said in the Torah that the borders of Israel, essentially, include all of Judea-Samaria. When the EU states that it's illegal for Jews to be in Judea-Samaria, it's saying G-d is wrong--or lying. Concerning Israel, the EU speaks as if its word is more perfect than G-d’s. But this ‘Greece problem’ demonstrates that the EU clearly doesn’t know how to create ‘perfect words’ that will last forever. If the EU can’t create a world for itself, why does it think it knows better than G-d regarding Israel?)
In this Greece-EU struggle, no one knows who’s got the upper hand. Does the EU hold Greece by the, ahem, with its threat of expulsion; or is it the other way around—does Greece have the upper hand with its legal challenge of, ‘you can’t touch me’; or, will each squeeze the other into a painful stalemate where both will suffer?
The EU thinks a lot of itself. But it’s ignorant. It knows nothing about Israel. It knows nothing about the words of G-d in the ‘Old Testament’. It knows nothing about the economic mess it’s gotten itself into. It’s clueless on all three issues.
If you want to know what happens when you give a lot of power to stupid, bigoted people, look at the EU.