How to Profit from Passage of Greek Austerity Measures

It looks as though Greece will avoid plunging the international financial system into turmoil, as the Greek Parliament is preparing for a second vote on austerity measures that the European Union (EU) demanded in order for Greece to receive the next installment of the 110 billion euro bailout that the European Union and the International Monetary Fund provided to Greece last year. Failure to pass the austerity measures would mean that the European Union would withhold the latest 12 billion euro ($17 billion) installment of the emergency loan that Greece is set to receive. Without the bailout money, Greece wouldn't be able to service its debts and would probably default by next month. A Greek default would weigh heavily on the international financial markets, putting pressure on the stability of the international banking system and placing the future of the euro currency in doubt. There is also the fear that a Greek default could lead to a domino effect, with other troubled eurozone economies like Portugal, Ireland, Spain and even Italy resorting to defaults as a way to deal with their fiscal problems. The austerity measures, which include controversial moves such as taxing minimum wage earners and selling state-owned assets, caused such an uproar in Greece that protesters attempted to prevent the Greek Parliament from taking a vote on the measures. The protesters clashed with police in the streets of Athens and much of the country was shut down by a 2-day strike called for by Greece's powerful unions. Although passage of the austerity measures will calm the financial markets in the short term, it's still unknown what the future holds for Greece. Many Greeks feel that the financial crisis that has befallen them was caused by international bankers and that those same bankers are the ones that are now forcing the Greek public to shoulder the responsibility of cleaning up Greece's financial mess. Although there may be some truth in that, the Greek system with its generous pensions, cronyism and corruption bares most of the blame. Still, a certain segment of Greek society has grown used to staging violent protests and the passage of the measures doesn't mean that things will suddenly cool down in Greece. While the austerity measures are a painful but needed step that should make the Greek economy more competitive in the long term, the Greek economy is suffering because of the short term affects of the austerity measures, which have included rising unemployment and reduced consumer spending. There are a number of ways for investors to trade, depending on their outlook of the situation in Greece and Europe. For those who feel that the successful passage of the austerity measures are a signal that Greece and Europe will not risk the damage to the international financial system that would be caused by a Greek default, the CurrencyShares Euro Trust FXE is worth consideration. If Greece is able to avoid default, the future of the euro currency will no longer be in doubt and the ETF could show strength going forward. Investors who feel that the austerity measures will make Greece more competitive and productive in the long term should look into two Greek stocks that are traded on the New York Stock Exchange. The Coca-Cola Hellenic Bottling Company CCH and the National Bank of Greece SA NBG are two stocks that American investors can easily purchase through ADRs that trade on the NYSE. These two stocks give investors the chance profit directly from any long term improvement in the Greek economy. Investors who feel that although disaster has been averted it is just a matter of time before Greece defaults on its debt may find the Market Vectors Double Short Euro ETN DRR an interesting investment option. If Greece falls, other troubled countries like Ireland, Portugal and Spain may fall soon after, which could lead to the collapse of the euro. The Market Vectors Double Short Euro ETN (DRR) would be one way that investors could profit from the collapse of the euro. Investors seeking a safe haven investment may want to look to the SPDR Gold Trust GLD. Greece and the other troubled European economies aren't the only ones finding themselves in a serious financial mess. Even the American national debt is looking less sustainable as the United States Congress and President Obama play a game of political chicken with the national debt. Under these circumstances, gold may be a better safe haven than the American dollar.