Why Stability Stalwart Singapore Should Be Seriously Scared If The Feta Is Truly Accompli!

- In the event of a Eurozone collapse, no one knows the extent to which countries outside the Eurozone will suffer, in particular the exporting Asian nations. Here is just one example:
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Why Stability Stalwart Singapore Should Be Seriously Scared If The Feta Is Truly Accompli!
by Tyler Durden, http://www.zerohedge.com/
We have discussed the probability (around 50%) and possibility of a Greek exit from the Euro ad nauseum; how the post-election anti-austerity rage is bringing the world to a new realization that this is probable not possible and the widespread risk aversion of this event is much more of a global event than local – no matter how many times you are told how small Greece is. Critically, as BofAML notes, it is the systemic threat of an untamed banking and sovereign crisis in Europe which makes multiple-sigma events less ‘tail’ and more ‘normal’. With money due to run out at the latest by July, new elections mid-June (that show massive support for the anti-bailout party), and the impacts on the real economy, exchange rate and inflation fears, and default and ECB balance sheet implications; it seems there are also strong incentives to keep Greece in.
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However, there is a political line of compromise and austerity that will be hard to cross for both parties which, if it failed – and it doesn’t have much time – would mean a very fast ‘ring-fencing’ would need to occur for this not to thermonuclear with the three main channels of volatility transmission to the rest of the world being: banking and finance, trade, and confidence – all three of which are active already with Asian trade (and banking exposure) seemingly under-appreciated in our view with Singapore dramatically exposed with a stunning 60%-plus of GDP tied up in European bank claims.
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Widespread risk aversion linked to fears of a Greek euro exit underscores the global nature of the European crisis. As we argued in the new year, the systemic threat of an untamed banking and sovereign crisis in Europe would push reluctant outsiders to preventively bolster IMF funding. This indeed materialized in March. However, both IMF and European firewalls still fall short of the amounts needed to protect Italy, Spain and the rest of the periphery. Global markets thus remain sensitive to rising probabilities of tail-risk scenarios. So how would the global economy be affected in the event of a serious adverse shock in Europe?
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