All eyes in the economic world this week will be on Greece, where at least one U.S. analyst sees the risk of triggering “a financial system meltdown.” There are mixed indicators on whether such a disaster can be avoided:
The good news, such as it is: French banks have reportedly agreed to a plan to roll over Greek debt. However, Germany’s finance minister doesn’t sound optimistic: “We are doing everything we can to prevent a perilous escalation for Europe but must at the same time be prepared for the worst,” Wolfgang Schaeuble said, invoking the specter of 2008, when “the world was able to take coordinated action against a global and unpredictable financial market crisis.”
Recall that the 2008 meltdown led to the Dow Jones Industrial Average — which had been above 12,000 in June 2008 — falling below 7,000 by March 2009. If Europe dodges the Greek bullet this week, stocks should gain, but the threat of civil unrest in Greece is sufficiently serious that there have been rumors of a military coup.
A descent into economic and political chaos is, of course, a worst-case scenario and worst-case scenarios rarely happen. Whether this week will be one of those rare occasions remains to be seen.
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