I believe that the money lent to Greece is just being funneled back to banks to pay their existing debt obligations. The so called bailout for Greece is really a bailout for banks. Everyone knows Greece will never pay back these loans. The hope of the ECB is that a Greek default can be pushed long enough into the future so that when it does default the banks will be in better financial shape. The fear is that right now the banking system can't handle a Greek default.
Yes, this could be an explanation. But why would the Greek government provide the money to the banks? I mean they could invest the money (that they've got from EU and IWF) in infrastructure and economy and then declare default. If I understand it well Argentina was as well helped by IWF, but in the end they defaulted - and it seems like it was the right step. So I do not really understand what is the EU's interest to absolutely safe Greece from default? They are pumping more and more money at a time where many voices say that Greece will not be able to pay back. Even George Soros thinks: "A Greek default may be inevitable but it need not be disorderly" (http://www.cnbc.com/id/43720940).
So if you could explain, why is it important for the banking system to be able to handle a Greek default? I mean throughout the financial crisis everybody is saying that it is absolutely important to save the banking system - every politician repeats this like a parrot. But why? Most of the middle/lower class population in Europe does not have spare money in a bank account but in contrary has debts for housing or other stuff. And I would guess that this is by far more than 80% of population. These people would not necessarily suffer from banks collapsing, but they are suffering from the economic cuts that the governments are doing everywhere in order to save banks - who are actually responsible because they did not mitigate the risk and triggered the subprime crisis.
So if you have a good explanation, please share with me.
The interests of the ruling elite of Greece do not coincide with the interests of the average Greek. Greece is part of the EU and it's leaders are part of a ruling social group within this context. How they view things is differently than how the average Greek views things. Or how you and I view things.
The Greek government has bond payments to make and needs money to make those payments. The funds recently released by the ECB are for Greece with the understanding that it is just going to take the money and pay make the bond payment. The ECB wants Greece to sell assets. There is money to be made by for foreign companies buying national assets of Greece. The ruling elite stand to make money from this as well. The average Greek stands to lose big time. Hence the demonstrations.
Greece should default. It should leave the euro. Its government should not exist to serve the interests of the banking elite.
That's only part of the picture. You could just as accurately say that the government should not exist to serve the interests of the unions. Taming the banks would not make Greece's problems go away, nor would aligning the interests of the Average Greek with those of the elites.
The population of Average Greeks doesn't maintain economic productivity sufficient for any kind of significant export economy.
The population of Average Greeks doesn't pay enough taxes to finance the government at even a basic level, never mind the more luxuriant indulgences like a bloated military.
To the extent that it's unionised, the population of Average Greeks values job security for themselves above overall employment and economic solvency.
You are right that the average Greek will be on the losing side of any sales of national assets. But from the looks of things, the average Greek is unwilling to consider the structural improvements that that are the viable alternative.
You've hit one of the biggest issues on the head and that is the greek do not pay enough taxes yet each time they are more than willing to vote for tax increases and increases of social services made available to them.
One of the things that the greece government has to do is cut back on those social services and ACTUALLY start collecting taxes it is owed to make up for that debt.
The greek people are unhappy to cut social services and are not willing to pay taxes... that doesn't work.
"Most of the middle/lower class population in Europe does not have spare money in a bank account but in contrary has debts for housing or other stuff."
Actually, unlike their government, most Greek households do not have high debts:
"Greek consumers are relatively frugal, with household debt equal to just 61% of GDP, compared the American household debt of 95.7% of GDP"
Most people in EU invest their money in real estate or some other hard value. But contrary to US, most people do not handle their economics for the retirement by themselves - this is handled by the governments. So there is really not much to lose if some banks will go bankrupt. It would finally clean up the whole mess. Looking at the figures above I ask myself why Americans did bake the US government to bail out the banks - seems they should have even less interest?
The American people wrote in large numbers to their representatives to not bail the banks back when. If you remember, the bill was not passed first time around.
It probably would have been much worse though had it not passed second time around. Tremendously long cues like the British bank Northern Rock worse.
