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Markets

Greek crisis grinding on

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The continued inability of the European Union and the international financial system to come up with a workable solution to Greece's crisis weighed on markets somewhat Monday, though Wall Street managed to squeeze out some gains.

Across the pond, equities performed more poorly , with indexes around the continent sliding. The Greek government recently reshuffled its cabinet, with a key national vote of confidence scheduled for Tuesday, but there is little reassurance to be drawn from this particular arranging of deck chairs.

There are a number of ways that Greece could avoid default, but it's slipping closer to that precipice each day. Of course, as the Economist points out, that might not necessarily be the worst thing for the Mediterranean nation's economy. A default can free a country from crippling burdens - that's the whole point, after all - and allow it to grow. Greece's European Union membership complicates the dynamic, however, and anything from a full default to a more euphemistic rescheduling could trigger a crisis.

Indeed, the president of the French Authority for Financial Markets told the RTL radio news station a rescheduling of Greek debt "could be either the beginning of the end, or the beginning of a new (phase) of European integration," according to the AFP .

"What is at stake through Greece is the credibility of the eurozone and of the construction of Europe," he continued.

Another complicating factor comes from the fact that only about half of the Greek debt is held by banks, the EU, the European Central Bank or the International Monetary Fund. The rest is held by a variety of asset managers, sovereign wealth funds and foreign central banks - and though the current players may be able to pull together a deal with the first 50 percent of the debtholders, that second half may balk and walk away.

If Greece does hit the default wall, expect convulsions across currency markets, a sharp blow to the euro and a potentially fatal crack in the reputation of the European Union.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.