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Monday, May 03, 2010

What happens when your debt is downgraded?

Greece is in a world of hurt and I am heading to Vienna and Northern Italy at the end of this month. I hope the euro hangs in there and we don't have a full-fledged meltdown while I am overseas.

However, S&P dowgraded Greece's sovereign debt to just slightly better than junk-bond status. The result? Interest rates on 2 year debt approach 20%.



Not so good.

Here is why a) the rest of the Eurozone is worried about a Greek default; b) why the rest of the world is worried about the Eurozone being worried about a Greek default; and c) why the United States, via the IMF, is worried about the rest of the world being worried about the Eurozone being worried about a Greek default:



If the Greek's default, that will put pressure on Eurozone economies which will put pressure on the ability of the Eurozone to import which will put a crimper on our economic recovery.

more here

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