Barron's
November 5, 2011
Euphoria is a word derived from the ancient Greek, and it describes a state too heady to last. So it seems to be with anything that suggests some chance of a solution to the European debt crisis.
The mere suggestion of an outline of a deal that seemingly would isolate Greece's debt woes appeared to propel the stock market in October to its best month since the '70s. No matter that there were huge blanks to be filled in. While Greek debt would get a 50% haircut, lowering the nation's impossible debt burden, the European Financial Stability Facility, aka the bailout fund, was to get the equivalent of hair extensions, expanding to €1 trillion through the magic of leverage.
It was indeed too good to last. So, George Papandreou, Greece's prime minister (at least as of this writing), dropped a bombshell early last week that he wanted to put the deal to a referendum, which likely would be rejected by a populace that already has had enough of austerity. By week's end the referendum was off—but only after Merkozy (as the duo of German Chancellor Angela Merkel and French President Nicolas Sarkozy has come to be called) spoke the previously unutterable—that Greece could drop the euro and default. "The question is whether Greece remains in the euro zone," Sarkozy said. "That is what we want," he quickly added, but the taboo had been broken.
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