Grexit was a word that came to existence during peak European debt crisis of 2011, when market participants were expecting an exit of Greece from Euro zone and after years of hibernation it is once again in limelight as its current government continue to negotiate an improved bailout package with its lenders namely Germany.
- Last night, legendary investor Warren buffet argued that Grexit might not be such a bad idea, given that Germany and other lenders will not be paying for Greece forever. However, he is not sure of occurrence of such. He also said that he has always been aware of structural problems in Europe but that not necessarily means end of Euro and its success.
What to do with Euro over a real Grexit?
- General consensus would say, investors will rush for safety, buying German assets while dumping Greece’s. Such an occurrence not necessarily Euro negative with regional transfers.
- Pessimist would go further to declare demise of Euro and asking or increasing bets on who might be next? Interest rates will permanently diverge over economic conditions in different economies.
However, putting aside the usual thoughts, when looked with a contrary view
- There might be no one next, at least for foreseeable future. Growth has started coming back over weaker countries namely Spain, Portugal, and Ireland. Troublesome still is Italy, however that might not be prefer exit over austerity.
- To strengthen this view, it can be argued that economic prospects and Euro’s appeal increases, when rotten apples are discarded from basket.
Euro is currently trading at 1.078 against dolla
The material has been provided by InstaForex Company – www.instaforex.com