“Greece will default,” Roach said in an interview on CNBC today. While the risk of such an event is “pretty close” to being priced in by investors, he said the potential knock-on effects are “definitely not baked in.”
European banks face the risk of a “domino effect” on debt markets were Greece to default, a Commerzbank AG executive said today.
Institutions would be able to handle a Greek default, regardless of the level of bondholder losses and the bigger concern is how it would affect Spain, Portugal, Ireland or Italy, Markus Beumer, a member of the German lender's board of managing directors, said.
A debt default by Greece could have disastrous consequences for Portugal, which must take steps to avoid the fall-out from such an event, Prime Minister Pedro Passos Coelho said.
Passos Coelho said it was crucial to ensure Portugal met the budget deficit targets required for the bailout. The government is doing this through sweeping spending cuts and tax rises which have pushed Portugal into a deep recession.
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