Monday 6 June 2011

When Greece defaults....

Given the inevitability of a default, KAMs may be interested in a Daily Telegraph article on what happens next:

  • Every bank in Greece will instantly go insolvent.

  • The Greek government will nationalise every bank in Greece, forbidding withdrawals from Greek banks.

  • To prevent Greek depositors from rioting on the streets, the Greek government will declare a curfew, perhaps even general martial law.

  • Greece will redenominate all its debts into “New Drachmas” or whatever it calls the new currency (this is a classic ploy of countries defaulting)

  • The New Drachma will devalue by some 30-70 per cent (probably around 50 per cent, though perhaps more), effectively defaulting 0n 50 per cent or more of all Greek euro-denominated debts.

  • The Irish will, within a few days, walk away from the debts of its banking system.

  • The Portuguese government will wait to see whether there is chaos in Greece before deciding whether to default in turn.

  • A number of French and German banks will make sufficient losses that they no longer meet regulatory capital adequacy requirements.

  • The European Central Bank will become insolvent, given its very high exposure to Greek government debt, and to Greek banking sector and Irish banking sector debt.

  • The French and German governments will meet to decide whether (a) to recapitalise the ECB, or (b) to allow the ECB to print money to restore its solvency.

  • They will recapitalise, and recapitalise their own banks, but declare an end to all bailouts.

  • There will be carnage in the market for Spanish banking sector bonds, as bondholders anticipate imposed debt-equity swaps

  • Attention will turn to the British banks. Then we shall see…


Financial markets anticipate anything from a month to 2 years.

Your Action: Worth a 'what if' by KAMs for key markets/customers?


  • Supplies to Greek customers invoiced in Euros (at up to 150 days credit)
  • Impact on Parallel trade

etc, etc,

Hooked? See the article's comments section for 352 mixed views...

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