What if Greece defaults?
Would the effects of an expected failure of a nation be largely symbolic?
Given that the entire Greece saga has been playing out for a number of years - and most speculation is that Greece will eventually default - when they finally default, will it be largely symbolic?
That said, buying Greek bonds would be an extremely high risk even now. (Isn't it 28% or so?) Banks that have lent Greece in the past are already having to prepare privately to add the hit for these bad debts to their books. Their investors must also take this into account in the share price.
Would it then make sense for Greece, even though it is not yet in default, to have an opinion with regard to Greece that there will be a default in the future? So it won't be a shock to anyone if it happens, and it won't hit the world economy badly because, for the most part, it will confirm something that was recognized years ago.
It will affect the Greeks as every bankruptcy affects the bankruptcy. They have already started to reduce their welfare policies and government handouts. Failure to do so would mean that the government cannot meet its obligations. It's not just external commitments, but internal commitments as well - pensions, social security benefits, healthcare, public services, military (and the Greeks have been in constant confrontation with neighboring Turkey over the years with multiple armed conflicts) to be struck.
Yes, they will definitely be affected a lot more.
It's only symbolic when things go on like nothing happened. As soon as large sections of people become poor, it ceases to be symbolic and becomes real.
Will there be a Greek default in the US? Hard to say, but probably not. Will it be felt in Greece? Bet it will be like that?
Chuck van der Linden
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