October 3, 2011

Greece vs. Russia

Source: BBC Sport 
Another new week with problems in Europe. IMF thinks that Greece are not doing enough and a Greece default on her debt is closer than ever. But this is not the first time a country defaults on its debt - it also happened in Russia in 1998.
When Russia defaulted in 1998, the stock market crashed with around 20 percent, but recovered soon. That crash resulted in a small financial crisis when the Hedge Fund: Long Term Capital Management collapsed as a result of the crash. The situation did not result in a deep financial crisis thanks to a bailout by Goldman Sachs, AIG, Berkshire Hathaway and the Federal Reserve Bank of New York.
Ian Wyatt has written an interesting article comparing the current situation in Greece with the situation in Russia in 1998:

Russia 1998:
  • debt to GDP: 57%
  • GDP: $220 billion
  • national debt: $131 billion
  • share of world sovereign debt: 0.47%
Greece 2011:
  • debt to GDP: 144%
  • GDP: $330 billion
  • national debt: $475 billion
  • share of world sovereign debt: 0.57%

One big difference today is that the problems in Greece are well known by everyone - while the Russian default of 1998 came as a big surprise to everyone. On the other side, Greece is not the only country having trouble. If Greece defaults on its debt, many other countries in Europe may follow.

Source: Seeking AlphaWikipedia  

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