You can't live beyond your means forever. When you borrow, lender expects you to return the money along with interest. When the borrower is a country, it is assumed that country has an ability to tax its citizens, print money and devalue its currency and pay back the debt. However, when a country is in Euro Zone, the power of printing money and devaluation of currency is not a choice. With the recent crisis, euro is coming under strong pressure with break-up now almost imminent.
India has gone through the similar phase in late 80s when Indian Government borrowed a large part of its consumption expenditure through short term foreign currency loans. India was on verge of default before it pledged Gold to developed countries (by actually shipping Air loads of Gold). Pledging Gold is known as the last step before bankruptcy and that was enough to prepare the country for hardships that followed. India did manage to come out of the situation by a steep devaluation, $= 18Rs became $=33Rs in two steps, import duties (already in the range of 50%+) were raised further and tax increases helped mend Government finances. What followed as a string of financial and economic reforms.
Can Greece learn from the experience? Can it come out stronger than ever before. History has shown that it can be done.
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