Last year, markets appeared frightened by the prospect of a Greek default, but various commentators have begun to talk-down the event. Perhaps most interesting was JP Morgan Chase’s (NYSE: JPM) CEO Jamie Dimon characterizing the net effect of a Greek default on US financials as being practically nothing.
Greece’s overall debt is a relatively paltry sum when seen from a global perspective. Still, the turn of events in Portugal may have given credence to what market bears have been warning of: a contagion effect.
There had been plans for a deal to allow Greece to take a “voluntary” haircut of 50%.
Yet, some creditors resisted the deal (perhaps hoping to use credit default swaps to profit—these instruments wouldn’t payout in the event of the default being voluntary) and there was talk that Greece would need to increase the haircut further to better get the growth rate of its debt under control.
