From Mark Grant, author of Out of the Box
And Now - Let's Play Chicken
Let me outline for you the scrub matches. The first is that the apparent winner of the Greek elections, the New Democracy Party, will try to form a colalition with the PASOK Party and this is what everyone is not betting on. The problem is that the PASOK Party has lobbed a grenade into the coalition discussion, announced by Katerina Diamantopoulou that Pasok will not join into a coalition government with the New Democracy Party unless Syriza also joins the coalition. Syriza stated moments ago it would not do this. The question then comes whether ND can form a government (150+ seats) with any of the other remaining parties including neo-nazi New Dawn or the communists. The answer is most likely not,so Greece again, for the moment, is nowhere. Then the New Democracy Party also campaigned on re-doing the terms of the EU bailout which Germany said earlier today would not be happening. The markets may well rally on the headlines but reality will set in soon enough I would think. At the moment, which could change in a Greek heartbeat or the smashing of a plate, Greece is in limbo once again and I would not be betting too heavily or cheering in the marketplacethat everything is resolved; it is clearly not.
Then the next game of chicken is not only will Germany/the EU back up from their position but will they give Greece more money because if they don't the country and the banks more money they both will default. So it is no government in Greece for the moment, playing chicken over the bailout terms, playing chicken over new money for Greece as their economy continues to deteriorate and as they amount they owe now, much less any new money, cannot be paid back under any scenario that anyone can concoct. The headlines may well drive the markets' reaction briefly but "watch out below" will be what takes hold as it must because that assumption is based upon facts and not hype.