Okay so we don't know anything about politics or economics but
let's look at Euro-land like a stock.
There are a bunch of different businesses from the
long-established Germany and France (cash cows) and the up and
coming countries like the Czech Republic (Stars).
But then you have Greece. In the strategic analysis it is a dog.
It's not providing growth or positive cash flow. They have had many
warnings and restructuring programs but there is still no end in
Greece seems to have compounded their problems with fraud and
trying to conceal the depths of their issues from Euro HQ and the
What's the right thing to do?
In this case you jettison the division and let it find its own
How does Europe lose by making an example of Greece? Some say
that yields on Euro bonds would have to go up. I say not so.
Germany and France will still be Germany and France. If anything
they will improve because investors will know that they will not
have to pay for chronic problems like Greece.
After all yields on state and local debt in the US vary from
place to place and all differ by instrument type and have a spread
over treasuries. Why shouldn't European country debt have the same
dynamic? Just because it's the same currency doesn't mean we can't
analyze and price country risk separately.
What will happen to Greece? Nothing. They can go back to their
own currency and try to restore confidence in their system, country
and economy. Some Greek companies and people might lose some
mobility or business preferences but they certainly won't be fatal.
This is Greece after all. The international companies there have
built themselves up before and during the Euro era. They will
continue to do so after.
The Euro makes a statement that they know how to deal with
change in both directions. So far it's been absorb, grow and
expand. Every business has to prove it knows how to deal with
problem divisions, markets and management teams.
By the way, by all appearances there are many investors
salivating at the chance to buy Greek assets on the cheap. Getting
dropped from the EU might be the best thing that ever happened to
the country and also a good thing for Europe and the Euro.
There will still be major benefits to being part of the EU but
there are also benefits from not being part of the EU and they cut
I say eject Greece and focus on building a strong EU. If you
can't let a chronically weak division fail then you are not going
to have a strong company.
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