Why can't create instance of local class in Java?

(Adding a second answer as my wrong one had three upvotes already.)

You can declare a class within an initializer block - but its scope is that initializer block, just like if you declared it in a method. So this works:

public class Test {
    {
        class People {            
        }

        People people = new People();
        System.out.println("In initializer block!");
    }

    public static void main(String[] args) {
        new Test();
    }
}

I can't say I've ever done this before though, nor can I imagine myself wanting to do it any time soon. Note that this is a local class, which is always implicitly an inner class. (Although if you declare a local class in a static method, there's no enclosing instance, just to make the terminology slightly weird...)

If you want to create a class which code outside the initializer block can "see", you need to declare it outside the initializer block. (Just like any other declaration - if you declared a variable within the initializer block, you wouldn't expect to be able to see it outside would you?)