The stock markets are only slightly down today, after Greek talks to find a common ground on their debt broke down, when Greek finance minister said conditions for further help were unacceptable.
Some other European debt markets were slightly higher. Both would seem in line with the consequences of a Greek default and exit, but it hardly seems enough turmoil, if these events were to be negative, and they actually took place.
The EUR/USD is actually higher today, after it closed yesterday at 1.1331, trading now above 1.1400.
If I look back at the 2011 crisis when Greece seemed to be dragging other nations into default and possibly a Euro break-up, markets had a completely different reaction.
Yes it was much worse in 2011 and more destabilizing. The risk for contagion was high. Back then we had most of the Greek debt held by markets, that being in investment banks, corporates and the like. Now we have the Greek debt owed mostly to EU and IMF and the taxpayers in those areas so the risk of contagion is far lower.
The scenario of Greece exiting the euro monetary union is entirely unpredictable though. Not that Greece really matters with only 3% GDP of the Eurozone economies.
The main problem is on loss of credible stability in the EU and the idea that if one falls out more can surely follow. I think Greece’s heavy tactics do not go down well in the EU and they have to accept these are their debts and nobody else’s.
You have to give something back before you take, and if they accept some measure of austerity then that at least shows their creditors they are willing to take responsibility seriously. Unless they change structurally it is impossible that these debts will ever get repaid, and Germans know that.