{"id":24897,"date":"2011-11-01T20:47:20","date_gmt":"2011-11-02T00:47:20","guid":{"rendered":"http:\/\/countingpips.com\/fx\/2011\/11\/01\/greece-drops-a-bomb-on-europe\/"},"modified":"2011-11-01T20:47:20","modified_gmt":"2011-11-02T00:47:20","slug":"greece-drops-a-bomb-on-europe","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2011\/11\/01\/greece-drops-a-bomb-on-europe\/","title":{"rendered":"Greece Drops a Bomb on Europe"},"content":{"rendered":"<p><a href=\"http:\/\/sizemoreletter.com\/\" target=\"blank\">By The Sizemore Letter<\/a><\/p>\n<div><a href=\"http:\/\/countingpips.com\/fx\/?attachment_id=2698\" rel=\"attachment wp-att-2698\"><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-2698 \" title=\"GreekPM\" src=\"http:\/\/sizemoreletter.com\/wp-content\/uploads\/2011\/11\/GreekPM.jpg\" alt=\"\" width=\"207\" height=\"207\" \/><\/a><\/p>\n<p>What&#39;s he smiling about?<\/p>\n<\/div>\n<p>Well, the Europeans <em>thought<\/em> they had a deal.\u00a0 Yet it appears that Greece had other plans.\u00a0 Proving yet again that Greece is not worthy of EU membership and is incapable of handling the responsibility that comes with using the euro, Prime Minister George Papandreou threw last month&#8217;s grand debt bargain to the whims of the fickle Greek electorate by calling a referendum in January.\u00a0<\/p>\n<p>The move appeared to catch all major parties to the deal&#8211;including Mr. Papandreou&#8217;s own finance minister&#8211;completely by surprise and drew harsh criticism across the board.\u00a0 World stock markets collapsed on the news as investors are left to grapple with the question: <em><strong>What happens now?<\/strong><\/em><\/p>\n<p>What happens if Greek voters\u00a0say &#8220;no&#8221; to the terms of the bailout?\u00a0<\/p>\n<p>This is <em>The Sizemore Investment Letter&#8217;s<\/em> analysis of the possible outcomes:<\/p>\n<ul>\n<li>A &#8220;No&#8221; vote will mean that aid from the various organs of the European Union would immediately cease, forcing Greece into a &#8220;hard&#8221; default rather than the negotiated &#8220;voluntary&#8221; restructuring.\u00a0\u00a0 Though it would be unprecedented and there is no process in place for it, Greece would most likely be expelled from the Eurozone and quite possibly the European Union itself.\u00a0<\/li>\n<li>A &#8220;Yes&#8221; vote <em>might<\/em> preserve the fragile status quo.\u00a0 But at this stage, it might not matter.\u00a0 Papandreou&#8217;s move confirms Northern European (and primarily German)\u00a0worst fears\u00a0about Greece&#8217;s\u00a0credibility as a negotiating partner.\u00a0 Good faith has been shattered, and European leaders will not not risk embarrassment by trusting Mr. Papandreou or his successors again.<\/li>\n<li>The referendum might not happen at all.\u00a0 Mr. Papandreou&#8217;s own party is in open revolt over his unilateral decision and is demanded that he resign.\u00a0 Of course, a snap election would throw additional political uncertainty into the mix, which&#8211;again&#8211;points towards an unruly hard default.<\/li>\n<\/ul>\n<p>Greece is due to receive an \u20ac8 billion euro bailout payment in mid-November, but that would now seem to be at risk.\u00a0 Why would the Europeans throw an additional \u20ac8 billion when default is now all but guaranteed?\u00a0<\/p>\n<p>The next 24 hours will be telling.\u00a0 If Papandreou resigns and is replaced by a &#8220;national unity&#8221; government, there is an outside possibility that last week&#8217;s deal can be cobbled back together.\u00a0 But at this point, it is more likely that Greece is thrown to the wolves and left to fend for itself.\u00a0<\/p>\n<p>If Europe&#8217;s leaders move quickly and send an unambiguous message that the crisis stops with Greece, Europe can avoid a meltdown.\u00a0 But it will involve a rigorous implementation of the remaining planks of last week&#8217;s agreement.\u00a0 The European Central Bank will have to step in to support the Italian bond market and to act as a lender of last resort to Europe&#8217;s banks.\u00a0 And the monies that were to be used to prop up Greece should be used to support Europe&#8217;s banks, which will still need to be recapitalized.\u00a0<\/p>\n<p>In the meantime, get ready for more volatility.\u00a0 And you can forget about the &#8220;risk on&#8221; trade that I mentioned <a href=\"http:\/\/sizemoreletter.com\/is-the-europe-sovereign-debt-crisis-over\/\">last week<\/a>.\u00a0 While I recommend using any volatility as an opportunity to accumulate high-quality European and American dividend payers that will survive Armageddon&#8211;cr\u00e8me de la cr\u00e8me blue chips like <em>Sizemore Investment Letter<\/em> recommendations <strong>Unilever (NYSE: <a href=\"http:\/\/stocktwits.com\/symbol\/UN\" target=\"_blank\"><span>$<\/span>UN<\/a>),<\/strong> <strong>Telefonica (NYSE: <a href=\"http:\/\/stocktwits.com\/symbol\/TEF\" target=\"_blank\"><span>$<\/span>TEF<\/a>)<\/strong> and <strong>Nestle (NYSE: <a href=\"http:\/\/stocktwits.com\/symbol\/NSRGY\" target=\"_blank\"><span>$<\/span>NSRGY<\/a>)&#8211;<\/strong>I cannot in good faith recommend more speculative sectors like financials or commodities.\u00a0And once the dust settles&#8211;which might be a while&#8211;you might also\u00a0revisit those <strong><a href=\"http:\/\/sizemoreletter.com\/3-greek-stocks-to-consider-after-the-default\/\">Three Greek Stocks to Consider AFTER a Greek Default<\/a><\/strong>.<\/p>\n<p>Hang on tight, dear reader.\u00a0 2011 promises to have a wild finish.<\/p>\n<p>If you liked this article by <em>Sizemore Insights<\/em>, you\u2019d probably enjoy <em>The Sizemore Investment Letter<\/em>, our premium members-only newsletter. <a href=\"http:\/\/sizemoreletter.com\/subscribe\/\">Click here<\/a> for more information.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By The Sizemore Letter What&#39;s he smiling about? Well, the Europeans thought they had a deal.\u00a0 Yet it appears that Greece had other plans.\u00a0 Proving yet again that Greece is not worthy of EU membership and is incapable of handling the responsibility that comes with using the euro, Prime Minister George Papandreou threw last month&#8217;s &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/www.investmacro.com\/fx\/2011\/11\/01\/greece-drops-a-bomb-on-europe\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;Greece Drops a Bomb on Europe&#8221;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-24897","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/24897","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=24897"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/24897\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=24897"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=24897"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=24897"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}