The below is yet another example of false beliefs regarding U.S. "debt", which is a sovereign currency issuer, and Greek obligations denominated in Euros which must be "obtained" by Greek authorities to pay these obligations. Its apples to oranges yet this simple error in assumptions colors a disproportionate portion of the debate regarding the U.S. debt ceiling. Furthermore, the risk of inflation is massively overstated with this type of analysis, as it ignores the demand side of the equation. Friedman famously said "inflation is always and everywhere a monetary phenomenon". He was incomplete. Inflation IN A FIAT CURRENCY REGIME comes from massive monetary creation by bank credit and associated wage demands.
Greece has a sovereign debt problem. The bonds of the Greek government have been downgraded by a major rating service. Their prices have fallen sharply in the market. This means that the risk is high that the government will default on its sovereign debt.
The interest rates that the Greek government must pay in order to borrow have risen sharply. This is worsening the government’s solvency and budget problems.
The government faces default. The government’s various spending cutbacks haven’t solved the problem.
They cannot solve the problem. It’s apparently too late. The government would have to restructure its debt by renegotiating with its multiple lenders. That’s a difficult and time-consuming process. It would have to work out repayment while simultaneously altering government policies so that the country’s private market economy could expand. This involves knotty political and economic issues that take years to resolve. The government doesn’t have this time.
The problem traces back to the earlier fact that for some years the government was able to borrow heavily at low interest rates. This means that it was able to sell its bonds at high prices. The problem arose because these market prices were too high.