>In theory it should, of course, be the creditors. You buy an asset (govt bonds), you're implicitly and knowingly shouldering a risk of default. The institutions that bought these assets should have known what they were buying. Caveat Emptor.
Indeed. But the reason why you try to avoid a default (or the prospect of one) is that you want to continue to borrow money to finance your deficit spending. Otherwise you get the worst of both worlds: forced austerity and creditors that want nothing to do with you without high interest rates.
Yes, absolutely. I was going to add an edit to this effect. Damned if they do, damned if they don't. Anyway the running of these deficits _does_ need to be curbed. It's clear that Greece has been pretty terrible at collecting taxes and managing it's finances. Even now with "Austerity" the UK is still spending £4 for every £3 it earns. Austerity just means "slow the increase in debt". In fact it's prob not even a first-order change, but second order: slow the rate of increase!
Edit: don't know why you've been dv'd, your point is absolutely relevant.
Indeed. But the reason why you try to avoid a default (or the prospect of one) is that you want to continue to borrow money to finance your deficit spending. Otherwise you get the worst of both worlds: forced austerity and creditors that want nothing to do with you without high interest rates.