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Market Commentary – September 20, 2011

Executive Summary

AllianceBernstein – Three Scenarios for Greece

In the attached article entitled, "Three Scenarios for Greece", the AllianceBernstein team discusses the need for change in the Eurozone’s institutional structure, perhaps the creation of a parallel fiscal union, or a change to its membership.

The piece discusses two trigger points for Greece:

  • Disbursement of the sixth tranche of funding under the existing bilateral loan facility
  • Agreement on the second rescue package negotiated between Greece and the rest of the Eurozone membership on July 21.

Three broad outcome scenarios:
  • Continuation of current "muddling through"
  • An orderly write-off of Greek government debt
  • A disorderly default.

In discussing the risk of contagion, the team discusses two different perceptions of the situation:
  • Much of the financial instability is being caused by the perception that the Eurozone is in denial regarding the reality of insolvency.
  • The Euro is a flawed experiment.

The team concludes by outlining why there is an increasingly urgent need for action.


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