The Greek elections scheduled for this Sunday have the feeling of a classic sports battle like Ali-Frazier or Super Bowl 42 except this time the fate of the world stock markets hangs in the balance.
The events in Greece are playing out like a classic Greek tragedy with the elections becoming as much about the drama and events surrounding them as the results themselves. We have all seen by now the shocking video, and I am not going to go into details except to say that when these sorts of events happen we are nearing a breaking point or about to enter the eye of the storm.
On Thursday, ELSTAT, the Greek Statistical Agency reported that unemployment in Greece rose to 22.9% in the first quarter of 2012.
This is bad news for the NDP, who has been running neck and neck with SYRIZA to win the right to form a new government and attempt to negotiate changes to the loan agreement with the rest of Europe. As of the last official polls NDP appeared to pull ever so slightly ahead but with this slate of bad news and the POE-OTA union (election workers) calling a strike for June 16th and 17th claiming they are paid far less that their fellow government workers for election work it is no wonder the Central Banks are preparing for the worst. This explains the announcement that they stand ready to support the markets if need be come Monday.
The worst case scenario, however, would be a strike occurring on Election Day with the results being contested by either losing party. This is a scenario that nobody has prepared for, chaos stemming from disputed results
No matter what the outcome this weekend there will be no winner. Both parties have committed to renegotiating the loan programs currently in place and the eyes of Europe will remain on Greece until the August debt payment passes. After that the clock of hope will begin again buying Greece 6 months of breathing room until February of next year.
Then the eyes will turn back towards Spain and Italy whose debt repayment schedules will hold the markets attention until 2013. Italy has roughly 62.8 billion euros in principal and 18.4 billion euros in interest payments in the third quarter of 2012 alone while Spain will be expected to refinance approximately 38.7 billion euros in principal and 8 billion euros in interest.
Any rally in the S&P 500 (SPY), Nasdaq (QQQ), and Dow Industrials (DIA) will be short lived at best lasting a month or so until the market grasps the reality of the problems facing not just Greece but Spain and Italy as well.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: I am short the market through leveraged ETF's.
