One can never get more water out of a dried-out well than what one first dumps into it. The wisdom of dumping water into a well for the sole purpose of draining it out again is not obvious to everyone.
Greece as a country (not only the state!) presently owes foreigners about 500 BN EUR. That is the “gross foreign debt of Greece in nominal terms”. Put differently, that is the amount of savings of other countries which have been lent to Greece. To put it even more drastically: should Greece fall into the Aegean, those 500 BN EUR would go down with Greece to never reappear again.
Regardless what brilliant ideas EU-Einsteins come up with (escrow accounts; budget commissioner; etc.), the 500 BN EUR will not get less going forward (unless part of it is forgiven). Instead, it will get larger month by month, by about 1,5 BN EUR per month at least. Why? Because – on a monthly average – Greece spends about 1,5 BN EUR more abroad than she earns abroad, and the difference between the two has to be financed. To date, this has been financed by the ECB (Target-2). Of course, the ECB could stop Target-2 lending but then the Greek economy would come to a sreetching halt (a lot less cars, motorcycles, smartphones, etc.).
To recognize reality would be saying to the lenders of the above 500 BN EUR the following:
Your 500 BN EUR will have to stay in Greece for quite some time to come. Until the time when Greece can again access capital markets in a normal way, if that ever happens. In the meantime, consider yourselves lucky if you receive some interest on the 500 BN EUR.
For you to even have a chance to ever reach that time (i. e. when Greece can again access capital markets in a normal way), you have to lend us more money to the tune of about 2 BN EUR per month. The good news is that this Fresh Money will be in a senior position to the 500 BN EUR already at risk.
How does it make sense for you to lend more money to Greece when Greece can’t even repay the loans already on the books?
The answer is: because we will use that Fresh Money to repair our well. So that our well again generates water on its own.
What makes us so certain that we can repair the well? Because we will ask you for advice and help. You all have well-functioning wells so you must know something about wells. Share with us your knowledge and once we have repaired our well, we will all live happily every thereafter!
Is there any mistake in my thinking?