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Given that the whole Greece saga has played out for a few years now -- and that most speculation is that Greece will default at some point -- if they finally do default, will it be mostly symbolic?

That is, even right now, it would be an extremely high risk to buy Greek bonds. (Isn't it like 28% or something?) Banks that have lent to Greece in the past must already be privately preparing to take the hit for these bad debts on their books. Likewise, their investors must also be taking that into account in the stock price.

Would it make sense then, that even though Greece hasn't defaulted yet, sentiment towards Greece is that there will be a default in the future. So, it will be no shock to anyone if it does happen and it will not hit the world economy strongly, because it will mostly be confirming something that was already acknowledged years ago.

Ellie K
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Joe.E
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2 Answers2

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It will affect Greeks as any bankruptcy affects the bankrupt. They already started reducing their welfare policies and government hand-outs. Default would mean that the government isn't able to meet its obligations. It's not only the external obligations, it's also the internal obligations - pensions, social security benefits, healthcare, public services, military (and the Greeks are in constant confrontation with the neighboring Turkey, with several armed conflicts throughout the years) - all that will get hit.

Yes, they will get affected much more, definitely.

littleadv
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It's only symbolic if things continue as if nothing had happened. Once large segments of people start becoming poor, it ceases to be symbolic and starts becoming real.

Will a Greek default be felt in the US? Hard to say, but probably not. Will it be felt in Greece? You bet it will.

mbhunter
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