Seeking Alpha
June 22, 2011
Stock market bulls bellowed yesterday as bourses around the globe rocketed higher. Several major European markets were up more than 2%, and the S&P vaulted 1.3% higher on the day. Unusually, bonds did not sell off with comparable ferocity, nor did commodities shoot drastically higher – indeed, gasoline fell more than 1% on the day.
The cause of this moon shot was the fact that Greece was preparing for a vote of confidence/no confidence on the government of Prime Minister Papandreou. Observers believed that the pro-Papandreou forces would win a narrow but important victory, because it would signal acquiescence to the Prime Minister’s proposed budget cuts, which are needed to qualify for the next draught of that crucial elixir of life: credit.
The outcome of the vote should not ever have been in much doubt. After all, the vote concerns the question of who will get the blame for the austerity measures. All legislators can naturally agree that the answer should be “someone other than me,” and Papandreou qualifies. Adding more cynicism to that observation, let me point out that getting someone to take money is rarely the problem in a negotiation. The main problems are usually (1) persuading someone to give the money, and (2) getting the recipient to pay it back. It seems to me that even though Greece has agreed to take the money if it is offered, the hard parts are still ahead of us.
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