Greek Debt Default Would Dwarf Argentina, Russia: Chart of Day
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A Greek default would dwarf those of Argentina and Russia and risk a “vicious circle” of contagion in Europe, according to Jim Reid of Deutsche Bank AG. The attached CHART OF THE DAY shows how Greece has double the debt that Russia and Argentina had combined when they defaulted in 1998 and 2001. Portugal and Ireland also have levels of borrowing that may leave them vulnerable, according to data compiled by Bloomberg.

“The numbers involved are far greater than the Russian and Argentine defaults,” said Jim Reid, head of fundamental strategy at Deutsche Bank in London. If Greece’s position continues to deteriorate, Europe is “risking a vicious circle similar to what we saw in finance prior to the banking bail- outs,” he said.

European Central Bank President Jean-Claude Trichet’s warning Jan. 14 that no euro-region member can expect special treatment from the Frankfurt-based lender’s funding rules fueled speculation Greece will have trouble getting access to cash. The cost of insuring against a loss on Greek government bonds using credit-default swaps climbed to a record.

Contracts on Greek debt rose to an all-time high of 344.5 basis points last week, according to CMA DataVision prices. An increase in credit-default swaps signals a deterioration in perceptions of credit quality.

Greece has 254 billion euros ($365 billion) of debt outstanding, compared with the 51 billion euros Russia defaulted on and the 57.2 billion euros on which Argentina missed payments.

Source >  Bloomberg | jan 18

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