Teenage Dream

    No country has everything. And that’s what trade is for, right? You don’t have feta cheese, and I don’t have rubber. Let’s make a trade, profit, and stabilize our national growth (GDP) so that both your country and my country can prosper and properly serve the population through various government services (in the United States think Medicare, Medicaid, and welfare). Greece is like an irresponsible teenaged girl who maxed out on her credit card, which is divided into interest and principle. Greece can barely afford the interest, much less the principle, which compounds daily and henceforth drives the country into debt.
    However, Greece is very good when it comes to government services, so if the country were to default, the programs would virtually be wiped out and the population would suffer detrimentally. Last year, the people of Greece rioted on the streets when the government tried to reduce the government aid programs, especially for the elderly, by about 50%. Germany, one of the strongest members of the union, is like the credit card company loaning money to the teenaged girl. At first, she probably was able to afford the interest and principle, but eventually started to run out of cash or euros to pay for the principle which in turn increased the interest. Interest at the start of a loan is like 90% and principle is 10%, with interest after a quarter, six months, or a year decreasing and principle increasing in rate.
    If Greece defaults, the debt goes away, similar to the teenaged girl filing for bankruptcy. However, its reputation and ability to obtain a loan goes sour. Say for example we stick to the teenaged girl analogy and she no longer owns a credit card. This means her credit score will be wiped out, which is financially worse than a bad credit score because she actually doesn’t have one anymore. In turn, luxuries such as a car or a house will become exponentially difficult to own because of her ruined reputation, which deters most potential loaners (it’s almost like paying cash upfront for a house and not having a mortgage). The only difference in this analogy between the irresponsible teenaged girl and Greece, however, is that the credit card company (e.g. Germany) does NOT want the girl to file for bankruptcy. This country is one of the most powerful and prestigious countries in the union. If Germany were at 100% before Greece defaulted, it would be down to 75 or maybe 50% after Greece defaults, which is why Germany, as well as France and Britain, are trying to keep the lower union members such as Greece and Spain afloat before hitting ground zero.