How to Trade on Greek Riots Against Austerity Measures

Much of Greece has been shut down for the second day in a row as Greek citizens protest against an upcoming parliamentary vote on yet another round of austerity measures. Passage of the latest round of austerity measures being debated in parliament is necessary in order for the Greek government to receive the latest round of funds from a bailout that was agreed to last year with the European Union (

) and the International Monetary fund (

). However, Greece's international creditors are still unconvinced that the Greek government is doing enough to reduce its deficit. The government has already enacted a number of austerity measures but the only noticeable effect of the measures has been to worsen the country's recession. Protests and strikes against the austerity measures have become a regular occurrence in Greece but the latest protests have turned particularly violent. Police have clashed repeatedly with protestors, some of whom have promised to lay siege to the Greek Parliament in order to prevent lawmakers from entering the building to vote on the austerity measures that are expected to be passed today. Some of the protesters have thrown stones at the police and set fires to piles of garbage that have been sitting on the streets of Athens ever since an earlier strike by garbage collectors. Much of Athens is shrouded in smoke from the fires and tear gas that the police used in attempts to break up the more violent groups of protestors. The Greek riots are troubling to those outside Greece who fear a Greek default. Although the Greek government does seem sincere in its efforts to avoid a default and keep the euro as its official currency, it's unclear how long the government can hold out against such widespread unrest. The protestors claim that their government is more concerned with appeasing international creditors than focusing on the plight of the Greek people and they may be right. The violence in Greece comes at a critical juncture in the eurozone financial crisis. Earlier this week, Moody's Investors Service downgraded the credit rating of Spain and warned France that its credit rating was also under review. France is the eurozone's second biggest economy and it is critical to any efforts to stabilize the European financial sector and prevent countries like Greece from defaulting. With France possibly moving into the group of troubled eurozone countries of Greece, Ireland, Portugal, Spain and Italy, the crisis is only getting worse. Although the protests in Greece have been the most intense, there have also been protests against austerity measures in a number of other eurozone countries. If Greece does what Argentina did a decade ago and decides to walk away from international creditors and focus on internal problems, other countries could soon follow. While European leaders and international bankers say that a Greek default would be disastrous, it could do more harm to those outside Greece than within. One only needs to look at the state of affairs in Argentina before and after its default to see that sometimes a default leaves many of the people better off than before. With so much of the Greek population adamant that they will not settle for the policies that their government is forcing upon them, a Greek default is looking more likely. The Greek government could even be planning to pass the austerity measures in order to get a fresh infusion of funds, only to bow to public pressure shortly after and default on its national debt. Investors who see a Greek default as inevitable might want to short the euro or move money into safe haven currencies like the U.S. dollar or the Japanese yen with ETFs like the ProShares UltraShort Euro

, the PowerShares DB US Dollar Index Bullish

and the CurrencyShares Japanese Yen Trust

. With the future of the euro in doubt and even countries like France seeing their borrowing costs rise, these ETFs could profit when a eurozone member finally defaults. There are a number of investments that could climb higher if Greece's government is somehow able to pacify both international investors and its own populace. European financial stocks like National Bank of Greece

, Banco Santander

and Deutsche Bank

, as well as ETFs like the iShares MSCI Europe Financials

could see significant upside if the austerity measures pass, Greece avoids a default and European leaders come up with a comprehensive plan to address the eurozones many economic problems.