Investors worry about Greece

According to the BBC, investors are concerned that Greece may default on its debt. From the article:

This week two-year bond yields have surged to 3.09% from 1.9%. Ten-year Greek bonds had their worst weekly decline since January, with the yield up to 5.3% from 4.99%.

Greece (CIA World Factbook) may become insolvent or default in the immediate future – the relevant factors in the analysis include:

  1. Greece can be (and it is perceived that it may be) bailed out by the ECB
  2. Greece has relatively low unemployment at 7.7% (and generally its economy is vibrant and sustainable)
  3. The Greek culture (and perceived culture) isn’t one of reneging on obligations (notably, they don’t have a history of sovereign default)
  4. The Greek external debt is $500bn according to the CIA World Factbook
  5. Greek’s population is just over 10 million people
  6. Greek’s GDP in 2008 was US$357.5bn, meaning the debt:GDP ratio is approximately 1.4:1
  7. The public perception is that Greek sovereign bonds have exposure to a risk of default.