Greece as a country (not only the government) owes about 500 BN EUR to foreign creditors and every month at least another 2 BN EUR are added to this foreign debt (for import payments and replacement of domestic deposits withdrawals).
THERE IS NO SHORT-TERM WAY TO CHANGE THAT! (so why spend so much time on this question?)
The only way to reduce this foreign debt is to forgive it. What’s the point of that? You only upset those who have to forgive it. Let them hold on to 100% of their claims! The claims don’t matter to Greece; only the interest expense on the claims does. In exchange for letting your creditors hold on to 100% of their claims, negotiate with them that they lower the interest expense for the next, say, 10 years to a level which Greece can afford without jeopardizing the re-building of her economy. If Greece can afford only 2%, fine. Pay 2% in cash. If creditors want 6% instead, fine. Let them have 6%. But tell them that the difference of 4% will not be paid in cash but, instead, will be capitalized.
Here is a common-sense approach to problem-solving: when in deep financial trouble, don’t waste efforts on fixing present/past burdens. You can’t fix them, anyway, when in deep financial trouble. Put present/past burdens (the 500 BN EUR) aside and spend your time fixing the future. If you are successful in fixing the future, a fixed future may enable you to also fix at least part of the present/past burdens (probably not all of them).
Common sense does not understand why anyone would question “austerity” for the Greek public sector. I mean, there is all the evidence in the world that the Greek public sector, because of its size and inefficiency, is the root of most Greek problems. And now you want to continue to allocate substantial resources to that behemoth? Starve it to death, instead!
Now, the highschool student will understand that total economic activity is the sum of the activities of the private and public sectors. If the public sector is starved to death, the private sector has to compensate for that.
Not Keynes is the medicine for Greece; anti-Keynes is! Not deficit spending of the public sector is the solution; investment spending of the private sector is!
Anyone who has ever been involved with change management will know that it is virtually impossible to change a social system like the Greek public sector within a foreseeable time span. An existing social system of that size has so many self-protective mechanisms that it will devour all reformers.
If you can’t change it, make it superflous or irrelevant!
Take Soviet Communism as an example. The old social system could not be defeated; it could only be made irrelevant/superflous by introducing a new social system (and there are still suspicions today that perhaps part of the old KGB-system has survived with Putin).
So what is the common-sense solution?
By-pass the public sector and throw money, very much money, into investments in the private sector. Require the government to approve all legislation necessary so that such investments in the private sector are made.
Where should that money come from?
Ideally, it would be “Greek money” presently invested in, say, Switzerland. Here the trick would be to find ways how that Greek money comes back to Greece voluntarily. My suggestion: offer it the same security as Switzerland does but much higher returns.
Until the Greek money returns, the necessary money must come from places like the EIB or foreign companies who are prepared to invest in Greece if and when the security/return-equation is attractive. The EU could use its think tanks to devise ways how money (or machinery!) can be sent to the Greek private sector.
The only way for Greece to come out of the present mess half-way healthy is a successful private sector initiative. To make that happen is not only in the interest of Greece (by establishing the necessary economic framework for new investments). It is of equal interest of Greece’s creditors and, above all, of the Eurozone and the EU. They all will later be better off for it!