It'd be interesting to see what happens next: will investors flee from Europe? Will the banks have enough to resist the loss? Must the ECB and the stability fund support banks holding greek debt? Will fear about default spread to Italy or Spain?
Basically everyone is waiting for Spain, Italy, Greece, Portugal, Ireland and Iceland to crash. None of them have, despite all the screaming and all of them will have to implode in their own sad ways, eventually.
Thus, despite all the media talk about fear, drama and emotion people in the investment community are actually very unemotional and pragmatic and unfearful (I can not say they are courageuous now can I?)
The problem is that all of the above countries are still stuck in economic bubbles, yes the bubbles are not as rosy but they are in bubbles still — partly to keep American, British and French banks safe (who are the largest other party to all the debt that these countries have taken), partly because the populations there love to delude themselves.
Investors will get back into Europe after the crash to buy on the cheap — almost everybody is as cunning as a fox these days, nobody buys when the price is percieved to be too high, because of the abudance of information.
These types of investors are small guys like you & me, sovereign wealth funds.
However, there is an another type of investors who look for even a bigger score. Obviously, the counterweight to buying on the cheap in Europe is that a lot of banks in the U.S., British and France will be up for grabs as well.
To give you an example of how these other type of investors operate — you might not have noticed but there was a lot of noise during this late summer from the controlled alternative media, such as Zerohedge and even your trusty old charlatan Alex Jones and from rumours on the trading floor about Societe Generale being on the verge of a collapse — these rumours were magnified until the moment that S.G. turned to the Rothschilds in France for help and guardianship — then suddenly everything stopped. Heheee.... somebody is beginning to take control of the banks on the cheap.
The funny part is that the Rothschilds are not as rich as people claim or think they are — there have been a lot of people in the U.S. who are richer than them in terms of net worth, however they just manage affairs by spreading rumours and perception better than you or I can or that glamorous, over-the-top big, soverign wealth fund ever can — connections, connections.
I mention this as an example to conclude that there are two types of investors, the ones who are waiting for the big crash and the ones who are trying to manipulate through the anxiety and rumours prior to the big crash.
But nobody is particularly scared of anything as far as things go. Everybody is preparing themselves, like F1 cars for the start of the race. A game of nerves, perhaps but not of emotions if you know what I mean.
If everybody was waiting for those countries to crash, nobody would be buying their debt, which is not the case. Moreover, Iceland already had its crash. Stop spreading FUD.
There's a thing I do not understand, nominally speaking French banks' exposure to Greek debt is not that large. I have not a easy link as reference, but I seem to remember reading in some of last week's FT editions that BNP Paribas had the highest exposure, with ~4 billion euros, followed by Societe Generale, with 2 or 3 billion. Of course that to you and me it looks like a lot of money, but the Kerviel case alone cost SG almost 5 billion euro in direct losses (not counting the losses incurred by the case on the share price), so Greece going down (or taking a 50% cut) shouldn't be that much of a tragedy, at least in theory.
Now, why then all this panic? It could because of what you said ("spread rumors, accumulate riches"), or because there's a hidden iceberg somewhere in these muddy waters: maybe countries like Italy and France are much closer to collapse than people think.
Maybe it's because other countries could follow the same path. Greece isn't that big but if the other PIIGS fail to pay, it could be much more than a few billions.
Iceland crashed but they also declared default for all the foreign debt at the same time. As Iceland is very small, the effects were negligible for the foreigners. The effect was also a devaluation of the ISK because of the lost of trust in the country/currency:
