Financial advisor Dennis Tubbergen takes a closer look at what might happen if Greece defaults on its debt.
Grand Rapids, MI -- (SBWIRE) --05/23/2011 -- As a financial advisor, advisor to financial advisors, author and radio talk show host, Dennis Tubbergen frequently gives updates on where the U.S. and global economies are headed. One of Tubbergen’s recent blogs was devoted to what he sees as “the continued unrest” in Greece.
“For a couple of years, I’ve been following the developments in the country of Greece, anticipating that what occurs in Greece economically-speaking is likely to occur in many other countries around the world,” explains Tubbergen.
“Currently in Greece, because of the pain being caused by austerity programs implemented there, many Greek citizens are calling on the Greek government to ‘restructure’ its debt – a nice way of saying that they intend to tell their lenders to go pound sand on at least part of the debt,” states Tubbergen. “The UK’s Guardian reported on this topic on April 17, 2011.”
Tubbergen quotes the article as saying in part, “A growing chorus of voices is urging the Greek government to restructure its debt as fears grow that a ?110bn bailout has failed to rescue the country from the financial abyss and is forcing ordinary people into an era of futile austerity.”
Vasso Papandreou, head of the Greek parliament’s economic affairs committee, is quoted in the article as saying undergoing restructuring now is best as the country’s economic situation is “going nowhere.”
The article goes on to say, “Other members of prime ministerPrime Minister George Papandreou’s party have said that Greece is locked in a “vicious cycle”, unable to dig itself out of crisis with policies that can only deepen recession.”
Tubbergen refers to the Guardian article again, noting that the civil disobedience is wreaking havoc in the country as its citizens wonder if their homeland will be able to avoid a default on its debt. The unrest has been so bad in a suburb of the capital that Athen’s head police officer requested his men be removed from the chaotic suburb.
Political analyst Takis Michas is quoted in the article as saying without the ability to uphold the law “there can be no economic development.”
“Why should you care about a Greek default or restructuring?” asks Tubbergen. “Because it would likely have worldwide implications. Portugal and Ireland could follow.”
Tubbergen quotes an article from Gulf News on April 5, 2011, in which it states in part, “A default by Greece, which prices in the derivatives market suggest is likely, may condemn Ireland and Portugal to the same fate, as investors dump bonds of all three nations and voters resist economic austerity measures.”
Marie-Anne Allier, head of the euro-aggregate group at Amundi Asset Management, is said to have claimed in the same Gulf News article that Greece will restructure in 2013 or before. She is also quoted as saying, “If Greece restructures, it will be very difficult for Ireland and Portugal to impose a very strict austerity programme and not restructure. It’s a domino effect.”
“If that were to occur, German banks are likely to take a hit that they may not be able to survive,” adds Tubbergen.
He goes on to quote the BBC from April 15, 2011 as saying “For all the formidable strength of the German economy, the balance sheets of Germany’s banks are by no means the strongest in the world. German banks would not be able to shrug off $39bn or ?24bn of potential losses on Portuguese, Irish and Greek loans as a matter of little consequence.”
What is Tubbergen’s bottom line here?
“Debt has consequences,” concludes Tubbergen. “These consequences are becoming more obvious.”
Dennis Tubbergen has been in the financial industry for over 25 years and has his corporate offices in the USA Wealth Management Building in downtown Grand Rapids, Michigan. Tubbergen is CEO of USA Wealth Management, LLC and has an online blog that can be viewed at http://www.dennistubbergen.com. His weekly talk show The Everything Financial Radio Show is simulcast on two Michigan metro stations and also airs to over 600,000 financial advisors, with recent podcasts available at http://www.everythingfinancialradio.com.
The opinions expressed herein are those of the writer and not necessarily those of USA Wealth Management, LLC. This update may contain forward-looking statements, including, but not limited to, statements as to future events that involve various risks and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual events or results to differ materially from those that were forecasted. Therefore, no forecast should be construed as a guarantee. Prior to making any investment decision, individuals should consult a professional to determine the risks, costs, benefits and fees associated with a particular investment. Information obtained from third party resources is believed to be reliable but the accuracy cannot be guaranteed.