Courtesy of Scott Martindale, Senior Managing Director, Sabrient
The U.S. stock markets have been itching to rally, but unpredictable statements from governments both domestic and abroad keep traders on edge. Last week I reported that the SPY finally broke out of the 10-week trading range that saw multiple successful tests of support and resistance between 112 and 122. All systems were go as the EU appeared to have a strategy to address its debt crisis, starting with Greece.
But lo and behold, it turns out that Greece isn’t ready to make it quite so easy. Knuckling under to public anger and violent protests, Greece Prime Minister George Papandreou has called for a public referendum on the plan, which likely won’t occur until December 4. So, the global economy is essentially being held hostage until then. France President Sarkozy said the next $11 billion installment of Greek rescue loans, which was due to be paid in November, will not be issued until after the referendum passes.
German Chancellor Angela Merkel said at a news conference, “The referendum…is about nothing else but the question, does Greece want to stay in the eurozone – yes or no” A No-vote could take Greece into default, leading to the fall of several European banks and a possible break up the eurozone, and would likely put us back on the path to global recession. Merkel and Sarkozy is holding emergency talks with Papandreou in Cannes.
In effect, it appears that the future of Europe and the direction of the global economy rest in the hands of angry Greek voters. They must be thinking, “Hey, if the U.S. can get out of its economic mess without the sting of austerity, then why can’t we” Now don’t get me wrong, I’m all for democracy and all, but Greece needs some leadership right now from its elected officials. If Papandreou doesn’t have the cojones to let this rescue plan get going immediately, then I fear for the future of Greece no matter how much bailing out they get in the near term. They just can’t get out of their own way, even to save themselves.
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