How Serious Would A Greek Default Be?

There has been quite a bit of discussion about the Greek government being unable to finance its debt.
How serious would this be? I mean, Greece is a fairly small economy-it doesn’t have a lot of industry, and its main earners (shipping) are firms mostly headquartered outside Greece.
I understand that tourism is one of the larger industries-that ought to do OK,(if the Greeks cut their prices).
So, is this really anything big?
Or is it a case of Greece being the first in a series of defaults (Portugal, Ireland, Spain), which will escalate into something more serious?

I don’t know if Greece’s default would cause so much issues if it only effected Greece.

I think the key would be finding out how it would effect other nations.

For instance, if Greece was making payments to say Portugal. And the only thing keeping Portugal from defaulting was the money Greece was paying.

I can’t speculate but that is the real key. What would the domino effect be? Not really how defaulting would hurt the Greeks themselves but how would it be the trigger.

It depends on how close to insolvency the investors who hold Greek debt are. Given the massive amounts of leverage and small capital requirements that were de rigueur in the past few years, this could be a disaster on paper. The reality is that the nations or institutions deemed too large to fail by their host nations, which go insolvent due to Greek default will issue new debt to cover their insolvency and unless they’re Spain, Portugal, or Ireland, someone will buy it to keep the market stable.

On paper, it’s a big deal. In reality it’s pretty much all funny money when you’re talking sovereign debt.

Enjoy,
Steven

The kicker is that the Greeks are part of the Eurozone. What effect will a Greek default have on the viability of the Euro, and more importantly the other 15 member nations? The Euro has become the world’s second-largest reserve currency, and a default by a member nation certainly cannot be a good thing towards that end.

And it gets worse when you consider that a wave of defaults may follow it around the Med and up towards Ireland. This could actually break the Euro and see it die as a currency, which would have serious ongoing implications for global business and politics.

Serious?! Why, they’d end up on double-secret probation!