Greece is still there. Companies headquartered in Greece are still there, as are their Greek customers as well as the company’s customers outside of Greece if they’re an international company.
So what may happen should they go back to their old currency, the Greek drachma?
Simply put, instead of company earnings measured in Euros, they would now be measured in the drachma.
A potential economic benefit could come from the Greeks having more flexibility in encouraging exports while discouraging imports. With more exports, this would bring more funds into Greece. This may be done through currency devaluation.
Thus, should Greece leave the Euro it may be a good thing, although there would be turmoil as markets adjust in the short term to repricing of goods and services. Remember, all the countries that changed TO the Euro went through this already, albeit in a planned and controlled manner. My point being, those companies are still here. And we invest in companies when we talk about stock, not countries.
The potential problem comes from how exposed outside investors and other countries are to Greek banks. This is the default question that relates to Greek government debt not getting repaid. Banks that take on sovereign debt (Greek, Italian, Spanish, Portuguese, etc) may have exposure to default risk should those governments decide, or find themselves, unable to repay what they owe to investors who provided the money for the government to fund government expenses. Greece has taken steps to restructure their debt. Other countries with sovereign debt issues ,and their banks, have yet to take this important step to de-risk their banking systems.
The moral of the story is that opportunity and returns come from LOW prices, not high ones, in investing too. Having a broadly diversified portfolio with a disciplined rebalancing regimen may help in the long run. Neither diversification or rebalancing can prevent decline. However, minimizing concentrated exposure and maintaining an allocation you have targeted for your risk comfort may help ride through rough markets and uncertainty.
PS. The Dow, from its high mark of 13279.32 on May 1st 2012, would need to go below 11950 just to enter a “moderate correction” phase. See my PPS metrix definitions in Panic? Why? post for definitions of various correction phases based on market decline.