Greece debt brings its government to the edge

The debt which Greece finds itself burdened by, continues to threaten not only the country's own identity as a sovereign state, but is dragging the 27-member European Union into unwanted tension.

Greece is a developed country in Southeast Europe "with an advanced, high-income economy and very high standards of living. Greece has been a member of the European Union since 1981 and the eurozone since 2001, NATO since 1952,and the European Space Agency since 2005. It is also a founding member of the United Nations, the Organization for Economic Co-operation and Development, and the Organization of the Black Sea Economic Cooperation." (Wikipedia). Its biggest problem is that it can't pay its bills - Teatree.

Last week, the wealthy nations within the European Union - notably Germany and to a lesser extent France - negotiated a tough deal with the Greece government whereby a large loan from the EU (or more precisely Germany and to a lesser extent France) would be provided to Greece's creditors - and thereby, hopefully, calm the fears that Greece might not simply be able to pay off all that it owes over time. In exchange, further severe cuts in Greece government spending would be required (drops in pensions, welfare, infrastructure projects, investments in education, presumably military outlays, paying to maintain embassies around the world, etc, as well as all creditors having to take a 50% loss on their loans. (The theory is that the creditors would be more or less happy to count on getting half their money back, rather than the risk of losing it all.)

Who exactly holds Greek debt? The following, given in billions of Euros

Greek Banks 56

Other European Banks 50

ECB (European Central Bank) 50

Central Bank of Greece 10

Greek Social securities/other government 30

Other Investors (this is a very BIG category...) 120

Total Government Bonds 260

+ EU/IMF loans already disbursed 53

Total debt 313

After agreeing to the deal, the Greek Prime Minister George Papandreou surprised all the European world by announcing that he would actually have to hold a referendum within Greece and let the people vote on whether they would agree to the conditions for a more secure, albeit diminished financial future. Infuriated, EU leaders - mainly Germany and to a lesser extent France - voted to hold up a scheduled installment of further loans to prop up the government until after the referendum scheduled for early December.

Greek Prime Minister George Papandreou

Within 48 hours, Prime Minister backed off his referendum idea, and proposed a unity government (with the main opposition party) be formed to govern once the new terms of the loans were in place. Today, however, the opposition party, New Democracy (which is Greece's major conservative party) led by Antonis Samaras, rebuffed the offer and said Papandreou should step down as Prime Minister and new elections be called. Many Europeans aren't real impressed with Samaras's move, thinking the cost and turmoil of another election isn't exactly what the country needs at the moment ...

Antonis Samaras, leader of the conservative New Democracy opposition party isn't so sure they want to join in a disgraced unity government.

As one set of suits talks to another set, the risks are that a floundering in Greek with no agreement will necessarily bring other countries - not Germany or France this time, rather Italy and Spain - into a very weakened state themselves and the domino effect would ensue. This all seems dire (though not out of the question) and at the very least, the EU might find itself a 26-member Union, with Greece out of the Eurozone, returning to using its own currency and struggling with moribund, Moldovian-type economy for the near and medium term future.

A long time ago, Greece had its golden age, then fell apart. It might happen again.

Greece default will stress a lot of treaties and alliances with its Mediterranean neighbors

Greece has many many problems - observers widely cite the "culture" of ordinary citizens and businesses evading legitimate income and business taxes, as well as having to put up with bribery for permits and every other instance where government officials interact with citizens and businesses. As one author recently put it, "the real test is whether Greek citizens are willing to act as though they live in and contribute to a modern Western society."