(eToro Blog) Greece is going down. That is if the wolves have their way. In their collective opinions, Greece is nothing but a black hole, slowly sucking the rest of the Eurozone into its nothingness. It's well known that Greece is in trouble. Over the past several months, analysts and experts have been cautioning markets that Greece's fiscal problems are too overwhelming, to the point that debt restructuring is inevitable. Recently, officials from Greece and finance ministers from the Eurozone met to discuss their options and (finance ministers, at least) came to the same conclusion.

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The Greek government and the European Central Bank (with exposure of some €140 billion), however, continue to assert that a restructure is not necessary, that additional bailouts and austerity measures are adequate.

Analysts believe that nothing could be farther from the truth. Politicians and bankers from within the Eurozone don't believe it possible, either. They and their citizens are angry that they will pay the price for Greece's fiscal mismanagement, essentially being "punished" with higher taxes and a depreciating Euro. It seems that policymakers in the Eurozone are anxious for Greece to either implode or fix their fiscal mess, whichever is sooner. And given that assumption they may be willing to offer up a sacrifice to make things right.

To use an analogy, market bears are the wolves and Greece is the lamb which must be sacrificed in order to appease them. It wouldn't be an unheard of response. In the United States, Lehman Brothers became the scapegoat of the banking crisis there. Similarly, by restructuring, Greece would be able to trim its losses, and Europe could keep the problem isolated.

If Greece were able to withstand the pressure to restructure, certainly the banks who are most vulnerable would breathe easier. But the government can't manage its current debt load, adding more could just compound the problems. If worse comes to worst, and the Greek government is unable to reverse its course, bondholder losses - which includes major banking firms across the world - will be unavoidable.

In market trading today, Greece's troubles continue to weigh heavily on the Euro, lower against the U.S. Dollar again, and testing key support levels. On the eToro trading floor, investors of EUR/USD, recently at 1.4032, are favoring selling over buying by a 8 to 1 ratio.

Copyright 2011 eToro Blog

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