Seeking Alpha
June 5, 2011
Recently, there have been quite a few comparisons between a Greek default and the Lehman Brothers bankruptcy -- “Is Greece the 'Next Lehman Brothers'?”, “Greek Restructuring Would Be 'Lehman Moment,' MIT's Johnson Says” and "Could Greece be the next Lehman Brothers? Yes - and potentially even worse" to cite a few.
The comparisons, while tempting, are exaggerated and overstate Greece’s role in the European Union and more importantly in the global financial system. In short, it is our opinion that Greece’s debt issues alone do not pose the same threat that Lehman Brothers did in 2008.
As such, while a Greek default would be extremely disruptive, the disruptive effect is not as much due to contagion and the spread of systemic risk, but more due to the disruption of the status quo—USD down / risk on. A Greek default will obviously be hugely painful, placing stress on EU relations, reducing confidence in the euro and generally decreasing risk appetite; however an all out freeze of the global financial system and movement of capital as experienced before, during and after Lehman’s collapse seems out of the question at this time.
This is best illustrated by the Ted Spread, which still remains well within normal levels. See Figure below:
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