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What would it mean to the global market if Greece rejected the recent aid package and fell out of the euro zone?

May 07, 2012 by Chloe from Lancaster, OH in  |  Flag
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Chloe - there are a lot of "ifs" so any answer would be mostly opinion. I believe most investors would be more concerned about the potential domino effect on the European Union should Greece somehow leave whether completely or by dropping the Euro currency. The potential economic disruption caused by the dissolution of the union, or of the currency, resulting from other countries following Greece would likely have serious short-term negative consequences for the financial markets.

Comment   |  Flag   |  May 07, 2012 from Clinton, NJ

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George Cones, JD Level 20

Regardless of where one places responsibility for the situation in Greece, Greece can’t inflate its way out of the current economic problem since it is tied to the EURO. Even though it may be difficult for Europeans to fathom a partial (if not total) decoupling of the common currency, it seems like this may be the only answer for Greece.

There is a depression in Greece. People are suffering. If they had their own currency they would at least have a chance of inflating their way out of the problem over the next several years.

By being able to devalue their currency, Greeks would find it expensive to spend their money outside of Greece. On the other hand for foreign purchasers of Greek goods and services, or for investors, or for tourists, Greece would likely become a bargain. This is a radical solution but it seems to come closer to fruition every day.

2 Comments   |  Flag   |  May 07, 2012 from Wilmington, DE
Jeffrey Allen Bogart

George, I agree the people of Greece are suffering but much of it is their own doing. If you want lavish social benefits everyone has too pay for them. Note I'm not saying I'm for or against social benefits rather they must be paid for.

Flag |  May 07, 2012 near Cleveland, OH
George Cones, JD

There is plenty of blame to go around. The Popendreus (sp) government came into office to find out that the books had been cooked, discovering that the balance sheet was much worse than previously advertised. There was a familiar (US) name involved in showing the pre-Popendreus government creative off balance sheet accounting. Much of Greece's debt is was not direct government debt, but debt to banks (many of them German) for loans on real estate etc that should not have been made in the first place. Added to the corruption and excesses, a very bad picture indeed.

Flag |  May 07, 2012 near Wilmington, DE

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John is spot on! As far as my two cents; no matter how hard Greece tries they are not going to bring down the world economy!

Comment   |  Flag   |  May 07, 2012 from Cleveland, OH

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