Quote Originally Posted by wiggin View Post
Current interest payments on Greek debts are running, I believe, about 3% of GDP a year. That's far less than they should be paying on the open market, given the size of their debt, but it ain't free. Furthermore, even if interest is low, they still have periodic principal repayments or rollovers - they need financing and/or a hefty real surplus (NOT just a primary surplus) to make those payments. Default and devaluation would have been a much better approach years ago at the beginning of the crisis than now, but even now it would benefit - this massive overhang of debt sharply constrains their fiscal options.

I fully agree that the Greek economy is a basket case, and that I have yet to see a truly responsible politician running things there. I have no doubt that current private owners of Greek debt are playing with fire. But the only reason they currently have any access to capital markets (small as it is) is because of an implicit guarantee by the troika that Greece will stay on the straight and narrow. That's an iffy assumption, but there you have it - and as that assumption looks worse and worse with the election of Syriza, we're likely to see Greek bond prices continue to freefall.
According to the FT of january 25th this year, Greece does not pay interest on the €240 bn held by the other EU states untill 2022. This is the debt people like Krugman and others want to see written down.