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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Haim R. Branisteanu who wrote (72392)	2/7/2010 5:50:16 AM
From: KyrosL	Read Replies (3) \| Respond to of 74559

Canadian Finance Minister James Flaherty lent the Europeans a hand, saying Greece's economy was of relatively small size. "So in global terms it's not of intense concern," he said. I don't think the Canadian is thinking right. The problem is that even though Greek GDP is only 2.5% of the Euro area, Greek public debt is more than 5% of Euro public debt, and worst, the bulk of it (250 billion euros) is held by non-Greek big Euro banks. A $350 billion hit on Euro banks on top of their other credit troubles is much more serious than Greece's relative GDP size. Look at what the Russian debt default did a decade ago. Russia was relatively isolated economically. Its default was largely the result of a crash in oil prices. The size of the Russian default was less than a fifth of the Greek debt size, and there were no other serious credit problems then. Still, it triggered a worldwide crisis. Also, don't forget that if Greece defaults, it may trigger defaults by a bunch of other weak links in southern, central and eastern Europe, all of whose debt is also held by the big Euro banks. Greece may be a case of "too connected to fail".