Greek debt problems remain headline news. Will Europe or the IMF help them out but why is it taking so long to form a decision by its fellow European members.
Bond markets react strongly to the fear of default, the uncertainty over the Eurozone and the unification.
But why not take a rational view and have a look at the actors at play.
Europe is still in recession, has seen its currency appreciate against the dollar and sterling, not because of its strength but because of the weakness of the others which puts its economies and exports in a disadvantages position.
So from a political perspective why not extend the uncertainty over a rescue plan and let the currency depreciate further improving European Exports. Investors are generally risk averse, work on the basis of mathematics and drop securities if risk levels have reached to high.
Imagine the unthinkable and Greece defaults on its debt, what would be the implications for
- The still fragile European banking structure
- The stability of the currency union
- The implications for the other weaker members like Portugal, Spain and Ireland.
- Future members deciding on rendering their central bank.
So if the stakes are so high, logically we can assume (though you never know i.e. Lehmans) that Europe will eventual provide the support needed but waits as long as possible using the Greek problems as the perfect opportunity.
So for those who have fears on Europe, Europe might still be “All for one, one for Europe”
