Greece Receives Lowest Credit Rating by S&P - Likely to Default

doom and gloom for the world economy or what?

[walkman]

I don't like this at all, they are many 'Greece's waiting to happen. Reminds me of 2008 but now the governments are way more in debt. .

Granite Springs’s Truglia said that European officials should prepare for the fallout from a Greek default.

“What Europe’s governments should do now is look at the knock-on effects that will have for other markets and pressure that will exert on banking system,” he said. “But the problem is that governments always leave it too late.”

[bloomberg.com...]

[jecasc]

A mainly psychological problem. If you take a look how small Greece is and that it only contributes about 1.25 % to the EU GDP you have to wonder what the fuzz is all about.

What would happen if Greece could no longer honor its debts? Simple: Some banks would loose money. No surprise they are spreading all kinds of doomsday scenarios on how the Euro would collapse.

I mean - why does Greece have to pay higher interest rates? It is a risk surcharge because the risk of loosing the money is priced into the interest. What are the banks doing - and not only in Greece? They are charging the surcharge without wanting to honor the risk. First collecting the money for the risk involved and then passing of the risk to the tax payer for free. "Bail us out!" I guess the world would be better of in the long term if they had let a few more banks collapse some years ago.

[walkman]

jecasc, but have Ireland, Portugal, Spain, Italy...and others waiting. An increase in their borrowing costs and they go kaput.

I agree that Greece alone would be a small event.

Like it or not banks have to be bailed out, the entire economy halts without them.

[Lexur]

Numbers of greek debt are way better than those of the US but:

a) Greece is now into the euro and can´t devaluate the old dracma

b) french and german banks own the most of the greek debt and those countries can move the european union the direction they want to.