Will Greece become first developed country downgraded to an emerging market?
Wed, 06/20/2012 - 09:25 EDT - Financial Post
Greece is still at risk over the long term of becoming the first economy to be relegated from developed to emerging market status within investment indices, even if it has fended off any immediate exit from the eurozone
LONDON (Reuters) - Greece is still at risk over the long term of becoming the first economy to be relegated from developed to emerging market status within investment indices, even if it has fended off any immediate exit from the euro zone. The unprecedented switch, reversing a path Greece trod only 11 years ago, would cut the country off from investors in more sophisticated markets although it would open it up to fund managers who are more comfortable with risk. ...
A week ago we joked that Greece was rapidly sliding into the "fourth world" (and had the photos to prove it). Well, today Equity Index provider MSCI took our joke and made it into something way too serious when overnight it made Greece the first developed nation ever to be downgraded into "emerging market" status. Not quite fourth world, but that too will come.
Last week I was interviewed by Constantine von Hoffman for a CBS news article on regarding economic nightmares for Obama's 2nd term.
Calculated Risk was interviewed as well. His nightmare scenario is war, specifically noting the rise of Golden Dawn.
ATHENS — Ratings agency Fitch upgraded its sovereign credit rating for Greece by one notch on Tuesday, citing the country’s progress in cutting its budget deficit and the receding risk of its eurozone exit.
After nearly crashing out of the euro last year and coming under attack for stalled reforms, Greece has won praise in recent months from its international lenders for getting back on track and pushing through unpopular austerity measures.
LONDON (Reuters) - Greece is still at risk over the long term of becoming the first economy to be relegated from developed to emerging market status within investment indices, even if it has fended off any immediate exit from the euro zone.
LONDON (Reuters) - Greece has been placed on review for relegation to emerging market status by index provider MSCI, which would make it the first country to be thrown back out of developed equity indices. Analysts, however, reckon any such relegation would only happen if Greece were to exit the euro zone. MSCI, which has $7 trillion benchmarked against its indices globally, said on Wednesday that Greece was no longer in line with developed markets' size requirements. It also said Greek authorities had failed to address concerns over certain kinds of transactions. ...
Dr. Doom got it wrong.
The parade of economists and investors led by Nouriel Roubini predicting Greece’s ejection by now from the eurozone failed to appreciate the resolve of European policy makers to protect their union and the amount of pain Greeks are willing to stomach.
While it is easy and often enjoyable to distract oneself with daily drudgery such as who will bomb whom (if not so enjoyable for those on the receiving end of said bombs), the key word in the sentence is just one: "distract" and as Kyle Bass pointed out correctly, the best, and most "economy-boosting" of all distractions ends up with the proverbial red button being pushed.
According to IIF director Charles Dallara in a Bloomberg interview, "ECB will be insolvent if Greece were to exit the euro. Europe would have to first and foremost recapitalize its central bank."
Excuse me for asking but how would they attempt to do that? Print Euros?
Please consider Dallara Says Greek Euro Exit May Exceed 1 Trillion Euros
Article written by Prieur du Plessis, editor of the Investment Postcards from Cape Town blog.Investors last week faced a tug of war between signs of an improving U.S. economy and lingering concerns about Europe’s debt malaise. These worries moved to center stage on Friday when Standard & Poor’s downgraded the credit ratings of France, Austria, Italy, Spain, Portugal and four other European countries.