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By Daniel James Hayden IV

As rumors swirled over the weekend that Greece was close to defaulting on its national debt, Greek Prime Minister George Papandreou promised to stick with the austerity measures that are intended to get the country's finances back under control and lower the Greek deficit. Although Prime Minister Papandreou sought to calm fears that Greece would soon default, there is a very real possibility that Greece will soon run out of money to pay its bills.

The austerity measures, which include cuts in spending, higher taxes and the sale of government assets, have proven unpopular with the Greek people and have led to many violent protests since last year. Thousands of Greeks are protesting in the Greek city of Thessaloniki where the Prime Minister gave a speech stating that Greece would stand by the austerity measures and would not default on its debts. The violence has spread to the Greek capitol Athens where protesters have also begun to clash with police. The protests are cause for great concern in Greece, because many of the past protests and strikes turned violent and disrupted important services.

While the government's austerity measures have been widely criticized inside Greece, the country's international creditors aren't convinced that Greece is keeping the promises it made in order to receive bailout funds. Two weeks ago, talk between Greece and the so called troika of the International Monetary Fund [IMF], European Central Bank [ECB], and the European Commission were suspended because Greece wanted to shift more of the focus of the talks to promoting Greek economic growth and away from the painful austerity measures that have contributed to a worsening Greek recession. After the talks were suspended, German Finance Minister Wolfgang Schaeuble warned that if Greece was unable to convince its international lenders that it is committed to all of the reforms that it agreed to, the next round of bailout funds would be withheld.

If the next installment of bailout funds is withheld, Greece could run out of money to pay its bills within weeks. A Greek default could also lead to a crisis in the eurozone, as other troubled countries like Ireland and Portugal threaten to default if their debts are not restructured.

Most of the efforts of the Greek government have been aimed at lowering the country's deficit. However, the actions taken in the name of lowering Greece's deficit are also having a negative impact on the Greek economy. If Greece withdraws from the eurozone or defaults on its debt, there will be widespread negative effects, but the Greek economy could actually benefit from such a move. There is recent precedent for such an outcome, as most Argentineans saw their daily lives improve after Argentina turned its back on international creditors a decade ago.

Investors who feel that the Greek government will eventually be forced to switch its priorities from austerity to economic growth may want to look into the many Greek stocks that trade on American stock exchanges as ADRs. If Greece focused on improving its economy more than paying off its international creditors, Greek stocks like National Bank of Greece (NYSE:NBG), Aegean Marine Petroleum Network (NYSE:ANW) and Coca-Cola Hellenic Bottling Company (NYSE:CCH) could move higher.

The combination of higher taxes and reduced government spending has hit the Greek economy hard, which in turn, has led to reduced consumer spending. By defaulting on its debt, Greece could roll back many of the austerity measures and focus its resources on measures that could help make the country more economically competitive. By withdrawing from the eurozone and managing its own fiscal policy, Greek exporters would get a boost when their products became cheaper.

While an exit from the eurozone or a default could give Greece's economy a boost, those who were left holding worthless Greek debt would obviously fare much worse. The iShares MSCI Europe Financials (NASDAQ:EUFN) could fall significantly if Greece defaults.

There are also growing concerns over what a Greek default would do to the euro's value and whether the euro is doomed. Investors who feel that a Greek default is near might want to take a look at the ProShares UltraShort Euro (NYSEARCA:EUO) or the Market Vectors Double Short Euro (NYSEARCA:DRR) if they think that the euro will sink lower after Greece finally defaults. They could also buy the CurrencyShares Swiss Franc (NYSEARCA:FXF), CurrencyShares Japanese Yen (NYSEARCA:FXY) or SPDR Gold Shares (NYSEARCA:GLD) ETFs if they think that more money will soon be headed towards these safe haven investments.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: How To Profit From The Greek Default Threat