Can a State go bankrupt?

[Ganbare!]

With the current austerity measures taking place in Greece I think it's a legitimate question.
Salaries are shrinking by a third in this country as we speak, it's a pretty drastic cut. What would you do if your government tried to use you in order to bail itself out? Should we just let such states die since they apparently are not viable or should the IMF keep them afloat?

I wonder why countries with worse public finances are not going through the same troubles: Japan public debt equals 172% of its GDP, Italy totals 114%, both worse than Greece's roughly 103%. Why do markets trust and lend money to corrupted states like Japan or Italy?

[admin]

I'll bet Nauru goes bankrupt soon. Whatever 'bankrupt' means to a nation. They won't survive without aid, bu they'll get aid, just like everyone else.

[Ganbare!]

I think You are mistaken they can survive without aid, they'll just raise taxes and cut spending at unbearable levels, there might be political unrest like in Greece or people will just resign themselves and pay their government's mismanagement.

I still fail to understand the banks logic to lend money with so few guarantees.

PS: This topic should be moved to politics section, sorry.

[Ganbare!]

query.nytimes.com/gst/fullpage.html?res=9405E0DC113BF934A15752C0A9669D8B63

Apparently, credit ratings agency rate Japan and Italy AA which doesn't mean much considering they were the same ones that gave Lehman Brothers and co high ratings prior to the subprime crisis. Why let the private sector manage this fundamental task when we have the IMF? I don't understand, rating agencies are paid by investment banks, conflict of interests are inevitable.