Greek default? Wall Street says don’t risk it

23-Apr (Politico) — Top executives on Wall Street and senior policymakers in Washington are warning their European counterparts not to let Greece default and leave the eurozone, fearing the market reaction at a time of sluggish growth in the U.S. and instability in the global economy.

Some say they are not as freaked out as they were in 2012 about the prospect of always-in-crisis Greece getting kicked out of the eurozone, which could happen if a deal isn’t reached quickly. Some would even like to let the Greeks go and move on with life.

But then people mention Lehman Brothers. And the Russian default. And even an assassination in Sarajevo in 1914. And theoretical discussion of how better prepared the world is for a Greek exit quickly turns into fevered rumination on how it still might spark global financial Armageddon.

…“We are certainly better off than we were when this was happening three or four years ago,” said Larry Summers, the former U.S. Treasury secretary. “But the world vastly underestimated the impact of the Russian default, the subprime crisis and the risk of letting Lehman go. This is like pulling the thread of a sweater. It could tear off with no consequence. Or it could unravel entirely and set off something very big.”

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