Greece’s Euro Exit Won’t Look Anything Like 2008

by William Pesek

Bloomberg
June 11, 2012

Seoul (KOSPI) may be the most poignant place one could pick in Asia for a spectator seat at Greece’s economic implosion.

South Korea’s crash in 1997 turned a regional financial crisis into a global one, as a Greek exit from the euro is sure to do. The difference might be that South Korea came back strong, while it’s hard to see how Greece could do the same.

There’s another difference: What is happening in Europe has the potential to be far more disruptive to Asia than its own crisis was for the rest of the world 15 years ago. If Greece exits the euro region, it may well take Spain, the world’s 12th- biggest economy, with it.

And that raises a question: Is Asia even close to being ready for a meltdown that might dwarf its own? It doesn’t look that way.

“The key for Asia isn’t whether Greece leaves, but how,” says Simon Grose-Hodge, head of investment strategy for South Asia at LGT Group in Singapore. “A disorderly exit raises the chance of contagion and more widespread risk aversion, which hurts the more volatile markets, like Asia. As we saw in 2008, the bigger the shock, the bigger the stampede to exit all risky assets, regardless of merit.”

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