Lots of rumors flying in the last 24 hours over a potential Greek exit at the end of March. This comes via Niel’s Jensen and John Mauldin:
“Greece plans an orderly exit out of the Eurozone according to two sources close to Mr. Papademos, Greek Prime Minister, who spoke on condition of anonymity earlier today.
The sources confirmed that plans are ready to return to a legacy currency given the current circumstances and that such exit would be dealt with, quote “in as orderly a fashion as possible” unquote.
The plan does not come as a surprise but the timing may be surprising to most members and investors while negotiations about a severe haircut with the IIF are still ongoing.
Last year’s announcement by Mr. Papandreou, former Prime Minister, that a referendum would be held to decide whether or not to stay in the Eurozone may have set the precedent for developing a plan that apparently will be set in motion.
The stalemate in negotiations about the depth of the haircut on some of the outstanding Greek sovereign debt, said to be capped at 65-70% while Greece is looking for more concessions, may have set things in motion as the ultimate alternative.”
I don’t know how you pull-off an “orderly” exit. Especially considering the potential actions from the other troubled countries. The worry with a Greek exit is the domino effect to Portugal, Ireland, etc. It’s all rumors for now, but the seafloor might get kicked up as we head into the end of March. If this is all true it will substantially increase market uncertainty and markets hate uncertainty….
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.