There is a concept in economics known as the “snow-ball effect” on debt. It involves the self-reinforcing effect of debt accumulation arising when the growth of the national economy is less than the interest paid on public debt.
In math it looks like this:
I’m not going to focus on the mathematics here when the way the financial markets are reacting to Greece is all you really need to know.
Insurance costs against a Greek government default leapt to a record after leading debt analysts warned the country’s economy could face a ‘slow death’ because of its deteriorating finances.
The concern is that Greece’s economy is fundamentally uncompetitive in the world market, that it must borrow just to maintain its basic needs, and that interest payments on the debt accumulation is now reaching levels that has forced Greece to drastic action. Raising taxes and cutting social services to pay the interest will smother the economy further, making more borrowing necessary.