> Actually where the country controls its currency the effects are totally different and if the ECB could certainly step in for tiny Greece if there was a will.
It's the same thing. If you don't have enough money in the bank to make creditors whole, you print more (thus devaluing what everybody has). If you can't print, you cut their deposits. Either way, creditors are robbed. There is no magical solution here. Mathematics cannot be amended at will of any government.
If you spend more than you earn, someone somewhere someday is paying for it. And the longer you conceal that truth, the harder it is going to hit.
If the creditor is a bank, they're also creating money when they loan it out. Who is being robbed again?
In theory, it's either the shareholders, boldholders, or the broader citizenry that carry the risk in the banking system. So far Europe's governments have hung the risk on its citizens because either the banking system is too fragile to handle large defaults, or they want to preserve their bond holder and shareholder friends. probably a mix of both since they convinced €140b worth of bondholders to take a 50% haircut on Greece back in 2012. the hedge funds really were the main case of anyone getting "robbed" but that's what we call "credit risk".
The ECB can't handle Greece on its own because it has much stricter rules than a sovereign central bank would. It's bad financial architecture.
Per your last statement, there are MANY U.S. States, especially in the south, that have spent more than they earn at times during the financial crisis. I don't mean government spending, I mean taxes vs. transfers - wherein the Federal government is keeping the people in that state afloat. You don't read about those as much in the papers because we have a fiscal union and automatic stabilizers designed to help our neighbours out when they have problems. Europe lacks this.
Economics is not a morality play of evil debtors and angelic creditors or vice versa. Creditors can and should be wiped out when they make stupid loans. Debtors can and should be held to account but given forgiveness when they screw up (with limits on their ability and size of future screw ups). Failures to do either lead to systemic failures and/or revolutions. This has happened throughout history and will continue to happen regardless of your political system - monarchy, democracy, oligarchy, and anarchy.
There is one difference. When you have a government, it indebts people, who do not necessarily agree or understand the terms and the consequences. You cannot reasonably argue that because 50% voted for that government, 100% should face the consequences.
In fact is 100% plus their children and grandchildren. The real percentage of people marked by the debt that voted for the corrupt government is much, much, lower.
Actually, I can reasonably argue that. We get the government the majority wants (subject to filtering by the property holding oligarchy). I would much rather have that than a libertarian dystopia, which would be pure oligarchy in practice.
It was an argument: it had premises and a conclusion. The premises happen to disagree with yours.
The premise might expose a preference but that's because we are debating politics, wherein at some points up the chain of logical reasoning, one needs to pick preferences among conflicting principles.
It's the same thing. If you don't have enough money in the bank to make creditors whole, you print more (thus devaluing what everybody has). If you can't print, you cut their deposits. Either way, creditors are robbed. There is no magical solution here. Mathematics cannot be amended at will of any government.
If you spend more than you earn, someone somewhere someday is paying for it. And the longer you conceal that truth, the harder it is going to hit.