Portugal

In Spain, only Vladmir Putin is more disapproved of than Angela Merkel. Such is the level of polarization that Germany's chancellor has created in Europe that, as WSJ reports, even domestically she is being deriled for saddling Greeks with "soup kicthens upon soup kitchens." As Marcel Fratzscher, head of the German Institute for Economic Research, a leading Berlin think tank notes, "Germany has, at the end of the day, helped determine most of the European decisions of the last five years," and therefore, "what is happening now is a defeat for Germany, especially, far more than for any other country."

"We Greeks have voted 'No' to slavery -- but 'Yes' to our chains... What's simply whack-o is that, while voting "No" to austerity, many Greeks wish to remain shackled to the euro, the very cause of our miseries."

Does this look contained to you?

Who's next?

On the heels of Sunday’s referendum wherein Greeks essentially gave the greenlight for an unceremonious EMU exit should Europe decide to spurn the IMF and stick to a “no debt relief” policy for Athens, PM Alexis Tsipras and his newly-appointed finance minister Euclid Tsakalotos are making a final push to break the stalemate with creditors before the ATMs go dark and a supplier credit crunch creates widespread shortages of imported goods.

While the folks clogging the US tattoo parlors may not have noticed, things are beginning to look a little World War one-ish out there. Except the current blossoming world conflict is being fought not with massed troops and tanks but with interest rates and repayment schedules. Germany now dawdles in reply to the gauntlet slammed down Sunday in the Greek referendum (hell) “no” vote. Germany’s immediate strategy, it appears, is to apply some good old fashioned Teutonic todesfurcht — let the Greeks simmer in their own juices for a few days while depositors suck the dwindling cash reserves from the banks and the grocery store shelves empty out. Then what? Nobody knows. And anything can happen.

Should markets fret, and ECB action becomes necessary then we think the markets will price ECB action well before highly stressed levels. If we for instance take it view of the monetary policy stance impact seriously then market moves that take real yields to levels that persisted before the ECB started easing policy (negative rates started in Jun 2014) may be a trigger point.

On the heels of Sunday's landmark referendum in Greece, all eyes are now on global financial markets and how the European Central Bank intends to prevent contagion in the event Greece exits the currency bloc. 

More than even the unfolding "chaos theory" pandemonium in Greece, market watchers were even more focused on whether or not China and the PBOC will succeed in rescuing its market from what is now a crash that threatens social stability in the world's most populous nation. And, at the open it did. The problem is that as the trading session progressed, the initial 8% surge in stocks faded as every bout of buying was roundly sold into until every other index but the benchmark Shanghai Composite turned sharply red.

"This 'No' from the Greek people must pave the way for a healthy new approach," said Marine Le Pen.  "European countries should take advantage of this event to gather around the negotiating table, take stock of the failure of the euro and austerity, and organize the dissolution of the single currency system, which is needed to get back to real growth, employment and debt reduction."

With the Federal Reserve’s unwillingness to allow the markets to stand on their own feet, and not be so dependent on their interventionism with QE for years, and Zero interest rates for the same – the tool box may in fact be empty – at the most inopportune time. So here we are, once again, waiting or watching for what could possibly be the start of another contagion effect to ripple through the markets that has the potential of resembling 2008, or worse.  And the only thing to stand in its way will be the faith and/or belief in their omnipotence. For it seems – that’s all they have left. All while we watch the same crumble in the eyes of others across the waters as their Central Banks are being perceived daily more as villains or worse – inept

"Could deposits below €100k be protected as it happened in Cyprus? The answer depends on the total amount of deposits above €100k. If there are enough of these large deposits above €100k, then most likely any required deposit haircut will be inflicted on these depositors only. There are no recent data on how big this universe of large deposits is. The most recent data from the European Commission suggest that at the end of 2012, covered (i.e. those below €100k) represented 75% of eligible Greek deposits. We suspect this number is now significantly higher leaving little room for depositors with less than €100k to be spared."

"Do you think Europe should forgive your debt, check box 'Yes' or 'No'." "No" means a lot of pain now and recovery later. "Yes" means less pain now but no hope of recovery ever. Choose wisely...