Any of your firms forecasting worst case euro?

I’m interested to see if any of your firms have discussed what the fallout and contagion could look like from the PIGS situation quickly deteriorating. I’m starting to believe that the Greek populus will not accept austerity measures and that country is headed for a debt restructure. I assume that means large writedowns for fragile Euro bank balance sheets and further pressure on the Euro. I can’t really think too much further than that. For the sake of argument, lets say things keep getting worse. What will happen?

I am currently working on more extreme scenarios in my macroeconomic forecast model, assuming the EUR at 1,15. In my credit risk model, I plan to do stress tests with EURUSD 0,70. But for my company, the EUR exchange rate and the fallout would only be indirectly relevant.

It is remarkable how fear is building up even here. While I think it’s still more likely that Greece goes without direct debt restructuring, I expect unofficial concessions by interested parties. Mr. Ackermanns visit at Ms Merkels today looked much like something is being arranged. However you specify getting worse, I keep thinking about the upside, cheaper EUR is probably good for exporting countries, think Germany. Whats good for Germany is good for Europes GDP. Also Volatility rises again, possibly settling at a higher level, depending on your position that may be nice, think more retail money in saving accounts less in stocks. Stress with 0.7 EUR USD, why? In which time frame? I am not sure the US would like the USD quite that strong right now.

You think ultimately the current Greek debt is money good? I think ultimately the populus may reject the austerity measures and force a debt restructure. My thinking is the current bailout falls off the table in exchange for a debt exchange with ahaircut and a maturity extension. This seems like the path of least resistance as the debt owning banks would probably be fairly willing to take the concessions to calm the credit markets. Thoughts?