Greece - To default or not to default

There was a small but interesting article this week in the Australian Financial Review in relation to Greece. With the recent initial public offering of Facebook, the hundreds of millions of younger generation, tech-savvy individuals can even provide their two-cents worth on the Greek crisis through this social media. Amid all the “Greece bashing” about whether or not it should exit the Euro, it is worth looking back at history.

The last time that Greece had fallen into hard times and defaulted was just prior to the start of World War II. In fact, Greece has been bankrupt and defaulted five times before. More alarmingly, Spain has defaulted 19 times with the last time also being during World War II. These figures demonstrate that over the longer term, the world will continue to prosper and these countries may come back again with some form of balance sheet.

Unfortunately, markets have a short-term focus. That’s just the reality. There is no doubt that there will be some significant knock-on effect from any default in the near-term if Greece defaults. Our main concern about this knock-on effect is not about the actual event itself, but about the globalised world we now live in. The threat of contagion and massive market volatility can be triggered by a single click these days. In our view, technology and the psychological aspect this plays on investors is even more far reaching than the event itself of whether or not Greece goes bankrupt.

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