How Would a Greek Debt Deal Affect the Euro?

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Widespread expectations of a Greek debt deal are clouding the outlook for the euro. But it might not be as painful as some investors think.

In a new poll, a majority of economists predicted that Greece would have to restructure its debt in the next two years and there is chatter that a move could come much sooner than that.

A restructuring could be bad news for French and German banks and for investors who are long euros. But then again, maybe not, according to analysts at BNY Mellon.

"In our heart of hearts, we think that a Greek restructuring is coming," they wrote in a research note, and they don't discount the rumors that it could arrive over the next few weekends. But they expect a relatively benign event - "i.e. an extension of debt maturities along with a reduction in interest rates." And since this would be the least painful option for Greece's creditors, they believe a restructuring could even be a plus for the euro - even if a deal's chances of really fixing Greece's problems is unclear.

Think this is a contrarian view? Regarding the euro, maybe. But most of the economists in the poll expect a restructuring along similar lines.


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