A looming Greek tragedy?

Will Greece default on its sovereign debt? What will be the ramifications for the world economy if it does? Will it cause debt default contagion, and if so who would be affected by it?

The further downgrading of Greece's credit rating overnight has sent fresh jitters through the Euro zone, which has considerable exposure to Greece's debts. The European central bank is closely monitoring the parlous state of Greece's national finances. Australia's exposure is negligible, but the 2% plunge in the US stock market overnight and ripple effect today for Australia's market suggest that world financial markets are still experiencing some fragility. Bad news travels very fast!

The geo-political fall-out between those countries in the Euro zone who regard themselves as being fiscally prudent and the perpetrators of "fiscal abuse" has been one of the more interesting aspects of this latest episode. The motto of all French and German finance officials currently is "beware of Greek government officials bearing debts".