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It just doesn't really sound like reality here to me, talking about huge complex government budgets like this. Is the premise something like, they'll do all the necessary & proper spending first, and then at the end of that, if they are still allowed to issue some more bonds before hitting some limit (with some kind of timing, like the last day of each period?), then they'll max that out and give the money out to the cronies? So the hall-monitors from other countries try to perfectly set a limit on them in order to just allow enough for the proper spending which should be prioritized? If the leadership is simply corrupt and untrustworthy, why wouldn't all that 'favored' spending be mixed in with all the 'proper' spending, and the distinction being possibly subjective anyway?
Good governance is hard and I don't know all the ways that other countries and US states for example try to deal with these. The euro monetary union countries definitely have a tricky setup to deal with, without a 'united states of europe' fiscal authority. I can imagine the psychology of being in other countries and feeling a lack of trust of others' behavior. It just seems like everyone is moving away from thinking that arbitrary limits on the fiscal outcomes are workable solutions.
That chart of sectoral balances is the fastest way to really intuitively understand that financial assets are zero-sum. So when we talk about the government deficit, we're simultaneously talking about the non-government's surplus. You can slice everything into any number of different sectors, but a common useful separation is 'government' vs 'domestic private sector' vs 'external / rest of world' sectors.
What we find is that the private sector really wants to be running a surplus at almost all times, because people like to build up savings for security. So that's why in general the government almost always has to be running a deficit, injecting financial assets (money, bonds) into the economy. When the private sector is in deficit, that means people are collectively spending down savings and/or running up private debt, and we see it tends to end with a significant recession where the private sector forces itself back into surplus by cutting spending.
(The other source of financial assets would be the external sector, where a net exporting country runs a trade surplus. Then you could potentially have the domestic private sector and the government both in surplus potentially. On the flipside, if a country is running a trade deficit, then their government deficits need to be even larger in order for the private sector to be in surplus.)
So this is the dynamic 'savings desire' of the private sector. The behavior could be affected by various psychological, historical, cultural factors, and could be incentivized or disincentivized by stuff like tax-advantaged retirement saving, etc. We might find that the Japanese people lose trust in saving for the future by buying stocks, and instead they largely want to build up huge monetary savings for retirement, which could cause the japanese government to need to issue a massive amount of bonds & currency for people to sit on (without any inflationary effect, just having to solve the paradox of thrift and fight off deflation).
Going off some Greek sectoral balance charts here (which I would prefer to be flipped around 0 to look more useful) and from the paper they're quoting from. It looks like Greece had a moderate government deficit but their trade balance turned to deficit in the late 90s, which pushed their domestic private sector into significant deficit, probably running up a lot of private debt. Similar to the US at the time in the late clinton-era. Then Greece adopted the euro and was locked into effectively a currency peg with the likes of Germany, which essentially made the trade deficit structural from then on.
So then, during and after the financial crisis and great recession, the private sector was hammered and was trying to de-leverage and rebuild savings, which by necessity is going to force the government into massive deficit (as tax revenue falls and safety net spending rises, the normal automatic stabilizer reasons for this).
If the main moral failing (causing a larger headline government deficit number) turned out to be that they were running a trade deficit and had been suffering a private deficit for a decade, it doesn't really seem that damning. Hard to make corruption & profligacy actually work as a macro story (though I'm sure it's plentiful at the micro level).
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