Euro To Plummet On Greece Default?

Former Greek Prime Minister Costas Simitis has spilled the beans to a leading newspaper that Greece could soon default on its debt. So how might this affect the euro – and how can you benefit?

Peter Lavelle at foreign exchange broker Pure FX.

19.04.2011

Following its bailout from the IMF 10 months ago Greece has done more than leap from the frying pan into the flames. It’s managed a somersault backflip into a volcano. Interest rates demanded on Greek debt resemble house cats peering at irate firemen from the treetops - all but hissing I’m not coming down! I’m not coming down! Greek politicians meanwhile have fought to unknot business regulations as though trapped in a straitjacket. It all resembles a kettle that’s about to boil over.

For instance over the weekend former Greek PM Costas Simitis spilled the beans on his opinion – stating that a Greek default is a ticking time bomb. His contemporaries in Greece’s government rather gritted their teeth at this – finance minister George Papaconstantinou responded to all in hearing distance that Simitis was spouting nonsense.

The scent of panic

But the cat – not the cat in the treetops but another cat – is out of the bag. The markets have caught the scent emanating from Greece and that scent is panic. So if the tidal wave of debt Greece is riding at present becomes too high – what happens?

For the Greeks it’d mean going cap in hand to the IMF and pleading pennilessness. It’d mean confessing to the planet’s nations that Greece has eaten billions but can’t return the debt. That’s a bit like someone asking his friends to contribute to his mortgage and then shrugging his shoulders at the bill. For me - I’d have a hard time talking to that person again.

The euro meanwhile – to which Greece belongs - could tumble like a stone. Investor confidence could resemble a penguin soaring across the Pacific – that just then recalls it’s flightless. Indeed the markets have offered a teaser in the last 24 hours – the euro dropping 1% against sterling.

The philosopher’s stone

So how then can people transferring funds take this lump of coal and turn it into gold?

The best bet is to act like a mum that’s visited a jeweller’s with her kids – keep a close watch. The euro could resemble a train on a roller-coaster in the coming month as Greece threatens to sink into the mud – and the markets twitch. It’s also an 18-carat gold idea to contact a foreign exchange broker. Brokers can often provide sterling advice on transfers free of charge – and even keep watch on the markets for you.

Then - in the event that Greece turns out its pockets to find just moths – you’ll be in a strong position.

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