With the Greece negotiations hogging global economic headlines in recent days, I cannot help but ponder the implications of a Greece exit (“Grexit”) from the Eurozone. Many would say that it will reduce investors’ confidence in the Eurozone, but I think such an answer is nebulous at best. As value investors, our investment decisions are based on pure fundamentals. Market fearfulness is an opportunity only if we are aware of the fundamentals. I have identified the following 3 implications of a Grexit.
Default losses
In a Grexit, Greece is unlikely to be able to repay its bailout loans and creditors would have to incur a loss. Depending on the magnitude of write-offs, this might have severe implications on the financial health of creditor nations. Just how much does Greece owe? It has been reported that:
The eurozone bailout fund is owed 142 billion euros ($162 billion), individual countries are ...
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