You sounds like an expert on this.
Can you tell me why poor country have to pay high interest rates when borrowing
and rich country (OR powerful country like the US) pay very little interest rate ? and is this fair ??
If there is no chance at all that a country will default, borrowers would much rather lend to that country.
A country with a good financial reputation can count on all the lenders fighting to be the lucky one who gets to lend the money. They will definitely get a good deal.
A country with a marginal record will pay a bit more.
So doesn't that mean Greece should be off the hook right now? After all, it paid more up front, due to exactly this possibility. The lenders were happy to take the extra money from Greece, and profit from those loans more than they could profit from loans to Germany. Now that the tables have turned, Greece can claim it already paid the banks for that risk, so they have to live with it.
Except that's not what the risk premium is for. The risk premium does not cover irresponsible choices by the Greek government. It covers situations that are impossible to plan for, and impossible for the Greek economy to avoid, not situations it lands in due to crappy choices.
There is a reason I asked kallipolis if Athens had been hit by an asteroid while I wasn't looking: that risk premium. If Athens was wiped out in a natural disaster, I would not be here complaining about Greece, I'd be demanding the rest of the world help out and guarantee money for the country to rebuild, and I would be telling investors to live with the risk they took. Because
that's what they charged extra for.
Here's why: The US is a huge country with a big economy. It took a hit when Hurricane Katrina wiped out New Orleans. But the rest of the country could pretty much carry on like nothing happened. People could still go to work, still pay the bills. One disaster like that did not really change the economic potential or the size of the American economy.
If Hurricane Katrina wiped out Athens, that country is fucked, because that kind of disaster is a big deal in such a small country. The total economic potential, and the size of the Greek economy would shrink, for reasons mostly outside the government's control (They ought to build some tidal surge defences, I suppose, but a hurricane is a hurricane.)
THAT's the reason for that risk premium. THAT's why investors charge more. Because in a small, more fragile economy, it is easier for any sensible borrowing limit to be undermined by something out of the government's control.
But when lenders charge more, that does not give any government the right to borrow irresponsibly, to waste money, to finance corruption, to borrow far beyond the capacity to repay, even when there is no hurricane.
That would be like saying I get a good deal on a car loan so I have to pay it back at 5% interest, but my neighbour has a lower income and less work experience so the bank denies him and he buys the same car on his credit card, paying 22% interest.
He CHOSE to do that. He's paying more than me. That extra money does not buy him the right to skip out on even one payment, even though it's cheaper and easier for me. And he is NOT being exploited. He's the one who handed over his credit card at the dealership, nobody made him do it.
The bank knows he has less income to begin with and if his hot water tank blows, he might have to choose between replacing it and paying his credit card payment. I wouldn't have that problem. That's the risk he was paying extra for. Just because he's paying 22% interest does not mean he can go gambling, take out $20 000 in cash advances on his card, and then say to the bank "well I'm not paying and you can't whine about it because you already got your 22% those times that I did pay."
It doesn't work that way.
And I have to say one more time, a COUNTRY is not like a confused senior who manages okay, and wants to do the right thing, until a telemarketing scammer comes along and tries to sell them a time share.
A COUNTRY is allowed to make its own laws. It is allowed to HIRE as many finance experts as it needs to figure out just how much it can repay. They can get consulting and technical help from the best accountants and actuaries and financial geniuses in the world.
A country like Greece is not some lonely old lady being taken advantage of when she picks up the telephone. And THAT's the pathetic excuse we hear now. Greece was not taken advantage of by the banks. Greece took advantage of the banks, and other European citizens, and it wants to keep doing it. Banks can't compete against a country. A country can make its own laws for fuck's sake. It can tax people if it needs to. No bank can compete against those powers.
Not to mention you're passing a great opportunity to MAKE money from your brother by charging the successful one 0%. Charge him 1% and watch the pot grow over YEARS of interest. 
