The Outlook of the Greek Economy

Greece is once again seeking help from the European Union and the International Monetary Fund to avert bankruptcy. Andrew Schneider looks at what developments in Europe mean for the dollar.

Main building of the bank of GreeceWin Thin, a currency analyst at Brown Brothers Harriman, says a Greek default is all but inevitable. But he expects the EU and the IMF will try to keep the country afloat for at least another year or two. The aim is to avoid contagion that could cripple the region.

“The European banking sector right now is very, very weak. They’re holding a lot of Greek bank debt and a lot of Greek sovereign debt, and any kind of a hard restructuring now would basically blow up a lot of balance sheets in European banks.”

With the pressure off Europe in the near term, Thin says, markets will turn their attention to interest rates. The Fed appears more reluctant than other central banks to raise rates. That’s likely to drive investors away from the dollar again, in search of higher risk investments with stronger returns.

“That’d be emerging markets, equities, commodities – that would be oil, gold, copper — all these things that have been really highly, highly correlated.”

Translation: Near term relief for Greece will contribute to near term pain at the pump.

Bio photo of Andrew Schneider

Andrew Schneider

Business Reporter

Andrew Schneider joined KUHF in January 2011, after more than a decade as a print reporter for The Kiplinger Letter...