Thoughts on Greece

The markets reacted yesterday to the situation in Greece. Global stock prices suffered a modest decline as reactionary investors de-risked their portfolios and ran to the safety of high-quality bonds. While this is a setback for an otherwise positive year for investors, it is a very modest correction, all things considered.

Everyone was waiting with bated breath to see if a compromise could be reached and the messy “Grexit” or Greece’s forced exit from the Eurozone could be avoided, but Tuesday is the day that Greece is set to repay approximately $1.5 billion Euros to the International Monetary Fund. All indications are that they won’t be able to pay. What the future holds is uncertain but unlike the situation in 2010, any fallout from a Greek default is unlikely to have a contagious effect on European banks or other European countries. In reality, this situation makes for high drama and great journalistic fodder, but the economic consequences are probably very limited for those outside of Greece.

For those of you interested in more detail, below are links to several articles that describe the situation and possible outcomes.

Greece's Next Step: Overdue Debt and IOUs

Greece’s Five Possible Future Currency Arrangements

Posted by Jay Healy at 2:21 PM
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