You're basically arguing Greece's free lunch has stopped not because of financial mismanagement and lack of ability to grow but because somehow the international community "lost trust" in Greece.
Hmm yes and no. Each countries "trust" is based on its economic, political, legal, social and some what recent historical aspects of said country. If we look at Greece, the economic, political and legal aspects were totally shattered causing social problems. The state budget was a lie, because of politicians with the help of overseas banks hid debt and lied about the economic health of the country and the legal system not only has not delt with that corruption but allowed "lazyness" to creep into the tax system. Because of this, the trust in the country was shattered, meaning that Greece could not borrow anywhere, and had bills to pay. Because it was in the Euro, it could not pay bills internally by printing money and so on and so on.
I would not say Greece had a "free lunch" as you claim, it lied, hence the trust was gone and hence its ability to run the country on a day to day basis was lost.
Why did they lose trust? It really isn't so simple Pete. It's more than just people not trusting Greece to pay back, it's also whether Greece has the means to produce anything that allows it to grow and pay back its debt. If economics was as simple as a country borrowing to repay current debt then all countries would continue borrowing and never seek to repay anything or bother to grow or expand.
No that is not true. That is political bull****. Greece has an economy, has industry and has growth prospects.. if it is able to deal with the structural problems that ultimately caused the crisis there. This includes thinning the public service (which was not that large actually vs other countries). It is now way smaller than say the US public service. Fix the pensions that in some areas were nuts and now they have been cut so much that you cant live off them.. and tackle the tax system. On this one, the problems have been many.. hard to change over 100 years of thinking when it comes to taxes. Then there was/is the public owned companies that should have been privatized decades ago, restructuring of the labor market and so on. It is a lot, but lots of it is generic crap that all nations have to tackle sooner or later.. except the tax system one.
As it stands now, it pays its bills, just not the interest on the debt. Get rid of the debt and it has a massive surplus and has had actual growth in 2014 and 15.. this year it has been negative. Regardless it is not a massive negative as it use too be.
Problem is, the "west", read Germany and the EU, dont want the Greeks to just do what they have always done, but force changes in the country to something better. That is why debt relief is rarely talked about, but everyone knows that most of the debt has to be forgiven.. but not before the structural reforms are in place. Next step might be to temporary suspend debt repayments and/or interest payments as a carrot for the Greeks.. that is IF they keep down the road set out for them. Point is, the Greeks need to keep taking their medicine and not revert to old ways...
remember, the old way for Greeks was to just print more money and ignore the structural problems. They cant do this anymore, and that is a good thing.. same for Spain and Italy and France.. of course they will kick and scream but eventually they will see the light or suffer the economic crush of a default.
But my point is still the Greek situation is a very special situation in the industrial world.. they lied about the size of their debt and budget deficits.. the rates on their bonds were based in large part on that their size of their debt, the budget and of course growth... 2 out of 3 being lied about.. bad for your credit rating and bond yields.
You dont have that problem in Italy, Spain, Portugal, Ireland and so on... and all those countries have all tackled the structural problems that we all knew they had.. well Italy slowly cause it is Italy. In the end of the day.. had Greece not lied, then they would not be in the situation they are today, because the markets and EU would have gone in much earlier and over time to correct their mistakes. Here it happened basically overnight.