The Greek Tragedy: The Headlines Just Keep On Coming

Not hours after the IMF said that it would be open to delaying payments from Greece, Moody's is out with some comments on the situation and said that a Greek debt roll-over would be considered a default. The sovereign head of Moody's said that a Greek debt roll-over would be a credit event, and that a debt roll-over would not be voluntary, thus the default. As such, a Greek restructuring would be incredibly disruptive for banks, and the European Central Bank as well. It would be extremely hard, perhaps even impossible to have an orderly and effective debt restructuring for Greece. Having said that, Moody's feels that the Euorzone, and the ECB have the resources to contain short term financial pressures. Moody's said it sees a 50% chance of a Greek default in the next 3 to 5 years. If Greece were to default, it would most likely push the ECB into insolvency, and the whole economic system would be in a serious world of hurt. This news come just hours after the IMF said it would be open to delaying Greece's repayment. A senior representative for the IMF, Bob Traa said that Athens has made enough progress in tacking the crisis, but can not relax. It has to continue to do more. Athens currently has €340 billion worth of debt, or approximately 150% of GDP. If Greece were to default, German and French banks would be the hardest hit, with Deutsche Bank DB having to take significant impairment charges for the amount of Greek debt it owns. Other banks like BNP Paribas, Societe Generale and Credit Agricole would also likely have to take impairment charges in the likely event of a default. Greek banks like National Bank of Greece NBG have continued to get slammed on these reports, and National Bank of Greece could potentially be insolvent as well, should the country default on its debt. The summer is going to continue to stay interesting, especially in the Eurozone. This Greek tragedy seems like it is only going to end terrible, with perhaps all the players dying a slow death. Shakespeare would be proud of this play, but certainly not investors.