Tuesday, February 7, 2012

Will Greece Default ???

EU debt issue development lately has pointed to a possibility of Greece default in March when it failed to meet the deadline set by EU and IMF to implement strict austerity rules in order to get the second bailout funds.  Like one of the analysis last month whereby I pointed out should leave the option of Greece default and also possibility of being kicked out of Euro and that option remains status quo.

Is Greece default good or bad ?  It depends on time frame.  In a longer time frame Greece default and even being booted out of Euro is nevertheless a piece of good news for both Greece itself and Euro nations.  A defaulted Greece and out of Euro, Greece will be able to start afresh to rebuild its economy while Euro nations can concentrate the fire power in building firewalls around Italy and Spain to prevent a default case like Greece.  The outcome of Greece default and Italy/Spain default without any doubt will have different impact to global economy with the later case being more fatal and systemic.  In shorter time frame, yes Greece default is bad news as global financial sector will face with credit crunch issue.  However, also note that various Central Banks ( namely Fed, ECB, BOE, BOJ, etc ) all standing by stimulus or measures to counter the effect of Greece default. 

Global stock markets might have knee-jerk reaction in reacting to Greece default ( should it ) but that should not consider as bad.  Investors might probably want to take that selling down as an opportunity to accumulate.

As a whole, do not rule out of the probability of Greece default and being kicked out of Euro and if it does occur, shall not be alarmed or shocked by it.

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