On Sunday, Greek citizens voted for the euro. On Monday, investors voted against it.
And so, an election that we expected to avert an international financial meltdown ultimately corresponded with one.
The narrow victory of the New Democracy party on Sunday was widely seen as a sign that Greece is not ready to abandon the one-currency project yet.* But this morning, Spain's yield on the ten-year bond blew past the bright red line of 7%, which divides the merely-terrifying-and-unsustainable territory to the land of screwed-without-a-massive-bailout. The bloc's fourth biggest economy is one step closer to bailout or bust.
Spain is bigger than Greece. Four times bigger, in fact, as measured by GDP. Which means that when Greece kicks the can down the road and Spain implodes, the markets ignore the sound of foot hitting tin and listen instead to the implosion. Indeed, as Spanish yields soared, the stock market collapsed 2.5% ...
By awarding more seats to New Democracy than Syriza (the anti-euro and anti-bailout party) Sunday's election in Greece was not good news for the future of the euro, so much as the absence of obviously and immediately horrible news from Greece. But meanwhile, around the continent, there is so much obviously and immediately horrible news that it has overwhelmed whatever good vibes investors might have felt from Syriza's narrow loss.