It refers to the possibility of Greece exiting the euro. Greece is on a slippery slope to hell, otherwise known as abandoning a currency peg: think Argentina in 2002. European politicians have waffled and dithered but failed to deliver a workable solution. And now the people and the markets will have it their own way. Nouriel Roubini, the renowned bearish economist, has talked of the euro being a "slow-motion train wreck".
I recently had lunch with an intelligent banker who had an interesting perspective on Grexit. "There could be a military coup in Greece," the banker ruminated. "Remember the country had a military junta in the 1970s. The more civil unrest and political ineptitude you see in Greece, the more likely a coup is. Then the military will leave the euro, devalue the drachma and there will be a difficult few months for the Greeks. However, eventually, Greece will be so cheap that we will all want to buy holiday homes there, the construction industry will boom and the economy will revive. The most important thing is to get Greece off the front pages. Think about it, when was the last time you read anything about Iceland? Their banks went bust in 2008 you know."
However, my banker friend might be too optimistic. What the bears worry about is that Grexit will not be the end of the panic but the beginning as contagion spreads to the other weak European credits: Ireland, Portugal, Spain and Italy. "The European authorities cant let Spain go," a mole wailed. "No bank survives a Spanish default. Even if a bank doesnt have any direct Spanish exposure, they will have exposure to a counterparty that does."
I would urge readers to be cautious and adopt a defensive strategy regarding their investments.