Will Greece Leave the Euro Area Roach Motel?

by Pater Tenebrarum

Seeking Alpha
May 9, 2011

On Friday the U.S. stock market at first attempted to resume the party in the wake of a better than expected U.S. payrolls report. As others have noted (a comprehensive overview of the U.S. jobs report is regularly provided by Mish), the unemployment report was less great than it appeared on the surface. Notably, a better then expected reported gain of 244,000 jobs in the payrolls survey contrasted with a loss of 190,000 jobs according to the household survey and an increase in the jobless rate to 9% as a result of growth in the labor force (this effect will continue to bedevil the unemployment rate should economic recovery continue). Moreover, the BLS birth-death adjustment to the payroll data was far larger this year than last.

Consequently it is difficult to say why the stock market rallied. Was it due to the upside surprise in payrolls? Or was it a result of the underlying weakness in the report, which should keep a prospective tightening of monetary policy at bay?

In any event, the rally was soon cut short by renewed rumors regarding new developments concerning Greece. Nearly every day, Greek politicians are confronted with this or similar images:


The German news magazine Der Spiegel published a report late on Friday which asserted that the Greek government was pondering whether to leave the euro and reintroduce its own currency. The euro itself, as well as "risk assets," i.e. stocks and commodities, immediately sold off again. Gold bucked the trend, as it always does when sovereign debt related problems rear their head.

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