Tags: wilbur ross | greece | athens | deal

Wilbur Ross: If Greece Defaults, 'Not Much Is Going to Happen to European Economy'

By    |   Friday, 12 June 2015 04:56 PM

Investing legend Wilbur Ross contends that if Greece does eventually default, "not much is going to happen to the European economy" and even less to the U.S. economy.

“Right now, the problem is there’s no liquidity in the Greek economy,” Ross told Fox Business Network. “They have to get the economy growing.”

“The first problem they’re going to have to solve is get enough liquidity to get rid of all these ELA [emergency liquidity assistance] debts, before they can really start relending in a meaningful way.”

Ross said he doesn’t think an actual Greek default would have a major impact.

"Putting it in perspective, Greece is about 2 percent of the European Union economy, and its total imports from the rest of the EU are only about 50 billion euros ($56.31 billion),” he said.

“So as a singular economic event, not much is going to happen to the European economy, and even less to the U.S. economy.”

However, EU officials reportedly have held their first formal talks on the possibility of a Greek default, officials said on Friday. No one knows, least of all in Athens or Brussels, whether the anti-austerity government can reach a deal with its lenders before an end-June deadline and thereby avoid putting the country in grave danger of crashing out of the euro zone.

But senior euro zone officials are taking no chances, and discussed a series of scenarios in Bratislava late on Thursday, several officials told Reuters. These included a possible default on a 1.6 billion euro ($1.8 billion) payment that Greece must make to the International Monetary Fund, the global lender of last resort, at the end of this month, they said.

Meanwhile, Ross keeps the faith that Greece will eventually forge a deal with its creditors and remain in the eurozone.

“A default and a removal from the euro would provoke even worse austerity than anything being proposed by the institutions,” Ross told The New York Times earlier this week.

Ross, CEO of WL Ross Holdings, successfully bet on the Irish banking system when it was on the ropes. Ross is known for restructuring failed companies in industries such as steel, coal, telecommunications, foreign investment and textiles. As of June 2015, Forbes listed Ross’ net worth at $3 billion.

“But Greece may prove to be the toughest test yet of his knack for cashing in on eurozone crisis spots,” the Times reported.

Ross, who specializes in leveraged buyouts and distressed businesses, leads a group of investors who last year poured 1.3 billion euros ($1.47 billion), into Eurobank Ergasias, the third-largest bank in Greece, the Times said.

Ross believes it isn’t impossible for Greece to forge a deal with creditors “that restores the confidence of foreign investors,” the Times reported.

Ross explains that Athens really doesn’t have a choice. Greece could have even more of a struggle trying to go it alone with a bankrupt banking system.

“Mario Draghi, the president of the European Central Bank, has already hinted that Greece could benefit from his bank’s stimulus measures if Athens makes a deal,” the Times reported.

“If there is a negotiated settlement quickly, two things will happen,” Ross said. “I think the ECB. will be very supportive and restore liquidity to the banks. Two, it wouldn’t take very long at all for the banks and private sector to regain access to the capital markets.”

But not everyone sees the Greek drama reaching a happy ending.

A Greek exit from the euro is inevitable, Tom Hutchinson, senior editor of the Newsmax newsletter "The High Income Factor," told Newsmax TV.

“At this point, everyone knows they're going to exit, the question is when? It just becomes a matter of how long they're going to put this off, how long they're going to tango on,” he told “Newsmax Now.”

“The new Greek government has underestimated the ECB and Germany in their willingness to let them exit, so they don't have as much leverage as they thought, so negotiations are getting a little testy,” he said.

“But my guess is that they'll find a way to put off the inevitable a little bit longer,” he said.

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