Greece is just the 'tip of the iceberg'.

Greece is just the 'tip of the iceberg'. This is if the noted economist Nouriel Roubini is to be believed.

"While today markets are worried about Greece, Greece is just the tip of the iceberg. The thing I worry about is the buildup of sovereign debt," he told an international gathering yesterday.

This is a scary prediction for the already tainted European economies and global markets. Recent credit-rating cuts on Greece, Portugal and Spain have spread concerns across global investors. The European deficit crisis seems to be spreading. This is intensifying pressure on policymakers to widen a bailout package. We believe all this would be a negative for the economic recovery that was just starting to find some wings!

Roubini has also said the US probably will need a combination of increased tax revenue and lower government spending. Europe needs to curb spending. At a time when central bankers are busy pumping in cheap money into the markets in the name of stimulus, any cutback on government spending isn't seen coming anytime soon.

Anyways, as we wrote yesterday, if these European countries actually default, there will be an impact on emerging markets like India. But the impact would just be a knee-jerk i.e., short term. Whatever it is, it could provide you with opportunities to buy into your favourite stocks at lower prices. The idea is to not take cues from the 'price action' that will follow a Greece default, but to take a call on stocks' 'valuations' and then act.

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Investors globally seem to preparing themselves for the big crash. However, some words from Templeton Asset Management chairman Mark Mobius could help allay some of these fears. Investors are expecting another round of liquidity tightening led by Greece's debt default. Central bankers and financial regulators are all in support of an EU bailout. But Mobius believes that a default by Greece would be the best way to ease the European fiscal crisis. He believes that the crisis is unlikely to sustain for long or affect the prospects of emerging markets. Mobius also cited the fact that although the Greeks are rich, they are reluctant to pay taxes. This is due to mismanagement and corruption in the government. He therefore supported the idea of letting the 'Too Big' to fail this time. Else, its bailout could drag other nations in the EU to a debt crisis as well. We wish the central banks would agree with his logic.


Source:- my mail inbox from>Equitymaster