Greece – The Worst-Case Scenario – Greek debt analysis

The ongoing Greek debt issue is leaving its impacts on European economy. When at this time, a lot of people have switched their attention to the nascent recovery of the U.S; they are perhaps unaware that Greek issue can get worse. In this article, I am going to present an in-depth report on the Greek debt issue.
How come this happened?


At the start, it did look like a simple problem, but later it overtook other issues due to some bad economic decisions in the country. When the euro was established, it gave a lot of comfort in Greece’s economy as now they can easily get debt on lower rates. However, the government didn’t utilize this opportunity in the right way, and hence it was the start of this issue. With the introduction of euro in the Greece market, the GDP rate has climbed up to 100%. This has resulted in the increase of ongoing debt issue as investors came to realize that emperor is having no clothes.
Although it’s difficult to predict future, but things aren’t going towards where it should be. A total of 110 million Euros will be floated in the Greece market as a bailout program. Although this might be a good option, for the time being, but for future, it won’t work as long as people of Greece will suffer.
The situation of bankruptcy:
European nations like Greece have very minor chances of getting bankrupt. When a nation feels so, it just reshapes its debt mechanism. In most of the cases, the government usually increases the interest rate. In this way, the creditors usually leave about 20%-25% more loan. Greece is not the first country that looks concerned about getting default. In 1980’s there were several countries that were a reward with the status of default. In the majority of the cases, the main reason behind the bankruptcy was too much debt being spent on un-necessary expenditures.
The most horrible case:
It is not easy for Greeks to calculate how far and how worse this situation can go. Other fears include the unrest of the government, major currency collapse of euro, and market freeze credit. As a result, the growth of economy will eventually stop, and it will lead to a further unrest across Europe. As the equity markets would face the situation of plunge, the gold prices could rise up.

What can an investor do?
Unfortunately, there is nothing much a small investor can do in this situation. One thing he can do is to purchase bulk gold and use it for hedging. This scenario is the best example to talk about the concept of diversification. In this case if you own a diversified security, then you can survive.
Looking ahead:
All we can do know is to hope for the best and just wait to see how future unfolds in front of us. We can only hope that Greek’s political leaders would watch everything before implementing it in the economy.