The Greek financial crisis appears to be spreading its wings and sending jitters down the world economy. Risk nausea appears to be back with a vengeance. To bail away the indebted Greek economic climate, several central banks such as the Greek central bank and the ECB had bought billions of dollars well worth of Greek government personal debt. Now, with news of the likelihood of break of some Greek banking institutions, the Greek government newspaper might actually turn out to be worth less than it at first was. This could have a tremendous impact on the Euro, which now has considerable exposure because of the substantial amount of lending options to the Greece. The sudden revelation about the Greek crisis came when Standard & Poor’s seto its credit rating on Greece into “junk” area and slashed its evaluations on Portugal. monnaie grecque
The newly brewing Greek financial turmoil is not limited to the boundaries of Portugal. Several other European finance institutions from France and Indonesia have exposure amounting to practically $ 125 billion dollars. The German exposure to Greek debt includes EUR9. 1 billion invested by Hypo Real Estate and EUR4. 6 billion value of Greek bonds kept by Commerzbank.
The anxiousness between investors was apparent from the simple fact that several currencies dipped versus the dollar, including the Canadian dollar, which had just lately flexed its muscles and gone above parity with the US dollar. On the other hand, the Greek crisis seems to have made the Canadian dollar pare some of its recent benefits and it fell to below parity levels with the US dollar. The Australian and New Zealand dollars fell sharply against the US dollar indicating that investors are turning risk averse due to the Greek outcome. America dollar also rose as opposed to yen between other currencies. The Euro, which is often supposed to the most damaged due to it being the currency of denominations for most of Greek personal debt, also lost substantial environment to the US buck on the Greek ranking downgrade. It seems that the dollar continues to dominate the world of currencies as the safe haven currency.
The Euro’s high exposure is a result of the ECB’s relaxed secured rules prevalent since 08, when the financial turmoil intensified. These relaxed guidelines have proved a benefit for Greek banks, which have used some of their Greek government coopération to secure cheap European loans. Now, with the Greek sovereign rating being cut, the value of the Greek bonds considered as collateral, is under question. As per a Moody’s report, Greek banking institutions had about EUR68 billion dollars in ECB funding at the end of Walk. While initially, the ECB’s lifeline extended to Portugal may have helped contain the Greek debt turmoil spreading to other parts on the planet, the arrangement has its limitations. With Spain also facing a limit, the likelihood of a more widespread debt problems is likely. If the ECB continues to repair other debt ridden Western european nations, the cost of the European could come under question.
However, not salvaging a crashing economy could have even worse implications for Europe and the Dollar. Thus, the ECB along with Germany and the IMF are likely to be forced to give you a further bailout package to Greece, such that another round of financial hardship is not created. Almost all said and done, a sign of crisis everywhere seems to bring the US dollar sharply again into focus and it appears that the buck still remains the preferred choice in times of monetary upheaval.