Under weight of massive welfare state, Greece about to default on IMF loans

If you want to know what happens when a nation absolutely refuses to reform its insane spending - even when it finds itself at the brink of fiscal collapse - I give you Greece. Not that you want it. The International Monetary Fund doesn't. The Eurozone doesn't. The Greek banking system is now shut down, and we're a day away from Greece defaulting on its IMF bailout loans. When the Europeans presented Greece with an ultimatum - reform the spending now or be cut off - the most the Greek politicians were willing to do was call a referendum on the matter. And as we now see, that's not anywhere near good enough:

The arguments have raged for five months. The Greeks had their red lines. They would not adopt any new measures that deepened austerity, and they needed a commitment to discuss debt relief. They made some concessions on taxes and pension reform, but they were not enough for the EU-IMF creditors. Trust had all but vanished; they doubted the reforms would be implemented. Finally on Friday, the EU and IMF made their final offer: a five-month extension to the bailout programme with €12bn (£8.5bn) in funding, but with the condition that new reforms had to be accepted. Alexis Tsipras was not confident he could get the deal through parliament and, most importantly, hold his fragile coalition together. His opponents say that in opting for a referendum, he has put his party above the country. The referendum announcement stunned Europe's leaders. Some finance ministers learnt of it on Twitter. Not surprisingly, they decided that the poll essentially ended the negotiations. Some ministers say that they were close to reaching a deal - 98% there.

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The problem with the referendum, of course, is that it throws the fate of the reforms into serious doubt. What Greece's leaders needed to do was enact the reforms themselves. They weren't willing to do that because they've created a dependent state in which so much of the population is dependent on the spending that is now clearly unsustainable, they were terrified of the public's reaction if they gave into the EU-IMF demands without somehow being able to say the public was responsible for the decision. Of course, when you elect a far-left government whose leaders ran on a platform of reversing the modest reforms that had already been made, as the Greeks did five months ago, what do you think is going to happen? And given the widespread delusion of the Greek public, as clearly seen in the riots that have occurred in recent years, the public will reject the reforms and Greece will continue with policies of spending money it doesn't have. Of course, it's likely to be cut off long before that. The EU and the IMF can only take so much of this nonsense. What happens then? I'm not sure. This isn't the United States, and Greece isn't a municipality like Detroit that could reorganize under a Chapter 9 bankruptcy. At least there's no precedent for that sort of thing. But speaking of the United States, our own long-term entitlement obligations have been estimated in some forecasts to be in excess of $100 trillion - and our politicians appear no more interested in changing entitlements than the Greeks. Who bails us out when that fiscal house of cards can no longer stand? And under what conditions? You probably haven't thought about that, but you should.