Tuesday, October 4, 2011

What's Ahead for Greece?

The crisis in Europe continues to weigh down the markets here in the U.S., as investors have move from speculation over whether Greece will default toward strategies for minimizing the damage of that default. Moody’s rating agency has already declared that the likelihood of a Greek default was “virtually 100 percent.”

At this point, the other European nations may very well let Greece default, writing off the billions of dollars it owes to other member nations. While that would mean a big financial hit for Greece’s lenders - primarily the continent’s central banks - it would also end the crisis in its current form. Perhaps a larger concern would be that a default would drive up interest rates for all the Eurozone countries. Many of them are in a precarious enough position that it might tip them over into default as well.

It would also likely mean Greece would exit from the euro and return to its own currency – which might, ironically, benefit its economy, with a cheaper currency driving up tourism and exports. Certainly, the longer the sense of impending doom hangs over the continent, and the more the can gets kicked down the road, the longer it will take for Europe to return to economic growth.


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