http://blogs.forbes.com/afontevecchia/2011/06/13/roubini-warns-of-euro-break-up-as-greek-credit-rating-tumbles/Greece and the Eurozone increasingly resemble a dying animal, with vultures circling above. A double-whammy of terrible news hit on Monday, with a multi-notch downgrade of Greece’s credit rating by S&P, making it the worst in the world, and a gloomy commentary by Nouriel Roubini who warned that “the Eurozone heads for break up.”
Roubini’s view echoes S&P’s, which downgraded Greece’s long-term sovereign debt rating to CCC from B, effectively making it the “lowest rated sovereign in the world, having fallen below Ecuador, Jamaica, Pakistan, and Grenada.” The latest downgrade of Greece’s sovereigns is tied to “a significantly higher likelihood of one or more defaults” probably in the form of commercial debt restructuring. What was once an emergency option reserved for the worst-case scenario, giving bondholders a haircut while extending maturities, is now essentially seen as a given by most market participants. “Debt restructuring will happen” wrote Roubini, “the question is when (sooner or later) and how (orderly or disorderly).” (Read Greece: Preemptive Debt Restructuring Or Eurozone Exit).
Markets reacted accordingly. The euro-dollar exchange rate plummeted on the day, falling 0.7% to $1.4412. Greek bond yields reached spreads of 1404 basis points versus German bunds, with benchmark 10-year Greek bonds yielding 17%.
Greece and the Eurozone share the same problem. An optimal currency area would require convergence on monetary, fiscal, exchange rate, and political policies, which in turn would lead to productivity and growth rate convergence, explained Roubini.
I'm taking my daughter to London & Paris this summer for her 16th birthday. I wonder if it'll get cheaper?