Weekly Overview: Structured Greek Default in the Works

BinaryOptionsNow | Published on September 26, 2011 at 8:20 am

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binaryoptionsnow – A structured Greek default is now in the works and has a tentative timing, the first week of November. The G-20 and IMF discussions in Washington have reportedly resulted in enough pressure on Europe to go forward with what the markets have already viewed as inevitable. The Euro is already starting to take in to account the implications.

Six countries are tied in to the current situation, together with the ECB which is playing a critical role. Those countries include Greece, Portugal, Ireland, Italy, Spain and France. Here’s a quick look at how they will be affected.

Up to Euro 175 billion of Greek debt will likely be written off – 50% of total – which would be similar to the steps Argentina took in the 1990s that led to severe impact on its credit rating and ability to raise fresh financing. The harsh austerity measures that Greece will have to implement for some time will lead to calls to consider leaving the Euro Zone economies.

Portugal is in slightly better shape, and not likely a candidate to leave the Euro Zone. Ireland’s banks continue to face huge pressures, along with Spain’s, though the latter country’s financial picture is a bit more complicated by its autonomous regions and municipalities.

Italy’s debt picture is also in need of stabilizing, and the country may need monetary stimulus in order to keep in operating smoothly. The most likely move in this regard is a bond buying initiative by the ECB. Finally in France, French banks are highly leveraged to Greek debt. The government is likely to support its banking sector with further deficit spending, which could imperil its AAA rating.

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Trade the News: Key Economic Events Summarized

The week ahead will offer a few important updates including the New Home Sales due out in the US today.

In the US, New Home Sales, a monthly indicator to value the number of new single-family households sold on the last month, slight decrease from 298K in August to 296K this time is expected.

Later in the US, Sarah Bloom Raskin, Federal Reserve Governor is due to give a speech in Washington DC. In Canada, Mark Carney, Bank of Canada (BOC) Governor is also due to speak in Washington.

In Europe, the German Ifo Business Climate Survey (approximately 7,000 businesses) is due, a value the conditions and expectations of business on the past month, reduce from 108.7 points in August to 107 points this month is expected.

In Great Britain, Ben Broadbent, the External BOE MPC Member will speak shortly in London, with impact on the pound and Euro expected.

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