By: Dr. Mike Campbell

The Greek debt is believed to be €310 billion which is an enormous sum of money in any individual’s perception. However, given that the daily total of money involved in forex transactions across the world – alone - has now surpassed the $4 trillion mark it needs to be seen in perspective.

It has been said that “reputation” is worth more than money and what is at stake from a Greek sovereign debt collapse is the nation’s standing in the world. More than that, since Greece is a member of the Euro, the reputation and viability of the single European currency is at risk. When you consider that at the height of the global financial crisis, some financial institutions were deemed “too big to fail” and were bailed out by their respective governments, a full Greek default will simply never be allowed to happen. This is not out of any feelings of altruism to the Greek people or their previous administrations which swindled their way into the Euro in the first place, but because of the bigger picture and the likely consequences to the other 16 members of the club.

At the weekend, a meeting was held between the IMF and Greece and the G20 was also in session. Noises coming out of these meetings have made it clear that the world will not stand idly by whilst Greece goes bankrupt (but nobody will flinch at putting Greek citizens in the financial equivalent of purgatory whilst they do it). Details are in short supply, but it is clear that plans are being made.

Rumours are circulating that a “write-down” on Greek debt will happen. However, unless the ratings agencies come on board with this concept, it would be considered a default and therefore would serve no purpose. A more likely scenario is that Greece will be granted access to funds needed to meet its obligations at an affordable price, but the package will be presented such that it leaves no suspicion that a Greek default is possible – the element missing from the original bailout measures from last spring.