What Will Happen If Greece Defaults?

ByJon Safer

We all know that Greece can't pay it's debts and, as such, sooner or later it's going to have to default.

When it does, as many financial analysts say, the situation is going to be relatively similar to what happened in the United States in 1998.

Except much worse.

Before we move on, let's go back two steps and talk about what a default actually is.

Let's say you've taken a student loan that for some reason you just can't pay back. You're going to get your regular notices in the mail, maybe a few phone calls or emails, and if you're unable to make your payments for the period of 270 days, the loan is going to go into default.

The situation will then be reported to all of the credit bureaus in the United States, and it will become almost completely impossible for you to get another student loan (or any other kind of government student aid, for that matter, be it on the state or federal level.)

As a student, you're going to be almost completely grounded.

So, what will happen with Greece?

There are at least a few things worth mentioning.

First of all, its national debt will be restructured, in which case some of Greece's creditors will take massive losses. This, obviously, means that at least part of the principal debt or interest will never be paid back. When that restructuring is completed, Greece will most likely go into what's called restrictive default.

When that takes place, the European Central Bank will no longer accept Greek bonds as collateral to loan money to the local banks, and when that happens, there's a disaster in the making.

It is speculated that Greece has over one hundred billion Euros in bonds, but its banks will be pretty much immobilized as they won't be able to get the money they need to function.

So we're in for a crisis.

What's more, since it's very difficult to implement anything similar to the Troubled Assets Relief Program (which, by the way, was put in place by the U. S. to give the nation's banks money so that they could keep operating), we're looking at what many financial experts call every man to himself in Europe.

There's no central government which could institute TARP, or anything similar, in Europe, so unless the European Union or some other countries decide to get more involved financially than they are now, Greece, and even the whole continent, will never be the same again.

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News and Society: Economics
Jon Safer

Email Address:SubscribeEconomics Article FeedFind More ArticlesSearchRecent ArticlesHow To Solve The Homeless SituationProgressivism Isn't Progress, VIIIHow Secure Is Your "Secure" Job?A True Comparison Of Increasing Debt Between Bush And Obama AdministrationsHow To Compete With ChinaWould Einstein Think Us Insane?A Cluster of (Minor) ErrorsThe US Recovery Is Producing SurprisesA Sigh Of Relief For The Economic Status Of The USHuman Nature, Capitalism, and Greed and Power DiscussedSubmitted On January 21, 2012. Viewed 10 times. Word count: 419.

MLA Style Citation:
Safer, Jon".".21 Jan. 2012EzineArticles.com.26 Jan. 2012 .APA Style Citation:
Safer, J. (2012, January 21). . Retrieved January 26, 2012, from http://ezinearticles.com/?What-­Will-­Happen-­If-­Greece-­Defaults?&id=6832734Chicago Style Citation:
Safer, Jon "." EzineArticles.com. http://ezinearticles.com/?What-­Will-­Happen-­If-­Greece-­Defaults?&id=6832734EzineArticles.com© 2012 EzineArticles.com
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