Friday, June 24, 2011
What are the markets saying about Greece?
Economists love to personify markets, as if they "speak" through the prices they generate. In this case, they seem to be saying that the resucue package will not much affect the probability of a default. You see this in the high "compensating differentials" or "risk premia" that must be paid to investors for accepting the risk of default if they lend money to Greece, which is about 15%. From Calculated Risk: