If and when Greece finally gets the boot from the European Union, at least in terms of sharing the euro currency, we're going to see a rally in the euro.
So says Friend of Breakout Jon Najarian, the co-founder of OptionMonster.com. Expressing the view of many American traders trying to piece together the mess that is the EU, Najarian says the only real way for the Greeks to get out of their jam ("jam" meaning "rampant unemployment, rioting and a failing government") is for Greece to debase its own currency.
Najarian believes the EU nations taking a hard line against the profligate Greeks will send a message to both the remaining PIIGS and the rest of the world that membership in the club that is the euro currency is contingent on member countries being good economic citizens.
While the solution of bouncing the Greeks from the euro is hardly novel, the inevitability of such a move is just coming into focus. Greece's current socialist government, led by one George Papandreou, faces a vote-of-confidence on Tuesday. To Najarian and most observers, the Greek populous has rather strong feelings toward Mr. Papandreou, but "confidence" isn't one of them. When the no-confidence vote comes down later today U.S. time, the situation is likely to come to a head, in Najarian's mind.
So what's the most likely chain of responses to eject of the Greeks? Najarian says the euro rallies, the banks holding Greek debt take a hit (which is priced in already, as no one on Earth thinks Greek debt is worth the price of the paper it's printed on).
As for the Greeks themselves, they can begin the road to recovery by devaluing their currency to get out of this mess while simultaneously attempting to keep other countries interested in buying their debt. Hey, if Greece could give the world democracy, it seems the least the U.S. can do is show the Greeks how to print money and issue debt.
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- George Papandreou
- the European Union