Greece has sealed a rescue deal with the European Union (EU) and IMF. This might help it secure a multi-billion dollar bailout from the financial mess it is in currently. This might seem like music to the ears of investors worldwide. This is given that the global markets went into a spin after the country's credit rating was downgraded to junk a few days back.
Anyways, someone like Mark Mobius, the noted emerging market investor, does not think that a Greece bailout makes any sense. He believes that lending aid to Greece may drag down the EU as other indebted nations seek a bailout in turn. As he says, "A default will help to plug the leak."
As a matter of fact, Greece needs to repay Euro 8.5 bn of maturing bonds on May 19th, while the country's finance minister has indicated that the country can no longer afford to borrow.
Greece's bailout is yet another instance of bad behaviour (of taking too much debt) getting rewarded. It is also another instance of taxpayers bearing the brunt of the policymakers' short-sightedness. It is true that fear is high in such situations. And policymakers have fewer choices but to dole out billions to save the troubled entities - companies or countries.
But then, the policymakers are themselves to blame for bringing their companies and countries to such dire situations. And then their subsequent bailout just encourages more bad behaviour. This is a dangerous precedent to set for the future generation of managers and decision makers!