Greece and the Euro: Is the Worst Yet to Come?

With the recent development in Greece’s debt crisis (a real shocker), the Euro has gone for quite a tumble this past week.  Investors have started to question whether or not the broken country will be remaining a part of the European Union.  This in turn has put the currency into a free fall that only began to even out in the past day.

Reuters reported Monday that Greece’s bond rating has been dropped from a BB- to B on the Standard and Poor’s bond ratings.  This is considered by most investors as a junk bond.  At this time, investors in the Euro realized this is a time to sell to a more stable currency.  The Euro dropped over .05 to the US dollar in a matter of two days of trading.  While it has not been completely detrimental in terms of the value it has been seeing over the past few months, the concern remains what the EU will do with Greece’s economic struggle.

What began to happen after hearing the possibilities of a haircut for investors in Greek bonds, investors starting looking to commodities to salvage potential loses by the hurt bond.  While experts are stating there is no immediate worry for any countries in the EU to default, investor confidence is far bigger concern for the Greece, EU countries, and the Euro itself.  

As for my own investments in the foreign exchange market, holding the Euro with the GBP and USD was completely destructive.  The lack of diversification that I inexplicably held has hurt the amount of equity I hold, and in the future, I plan to invest more wisely.  Blunders in the currency market were bound to happen when having only traded for a single month, and I hope that my failures will eventually lead to understanding and future success.

What I am most curious is what Greece is going to do with their current and continuing economic struggles.  The Euro doesn't seem to be benefiting them at all (except for bailing them out), and the inability to devalue their currency as the European Central Bank controls the Euro makes it near impossible for Greece to fix their own problems.

What do you think will happen to the Euro in the near future?  With all the troubles Greece has experienced over the past year, is it truly worth it for them to remain in the EU?

References: "Timeline: Greece's debt crisis". Reuters. 9 May 2011.
                    "FOREX-Euro off 3-week lows on commodities, debt concerns a drag"
                    Reuters. 9 May 2011.

(Post by Evan Amano)