Eurozone debt crisis has long needed a "Grexit" or some other landmark event to occur to change the direction the beleaguered continent is headed.
When Mario Draghi announced that he would do whatever he can to preserve the euro, it seemed that moment was imminent. Since he uttered those words on July 26, the IBEX 35 in Spain has gained 17%, while Italy's FTSE Milano Italia Borsa is up 13%.
But the rally may quickly fade.
Draghi and the European Central Bank have not taken any drastic measures since then and investors will most likely have to wait until the September 6 meeting to hear what's next.
On Monday ECB policy maker Joerg Asmussen played to the sentiment felt by many German officials that it might be time to let Greece go from the euro.
"Firstly, my clear preference is that Greece should remain in the currency union," Asmussen said in Germany's Frankfurter Rundschau."Secondly, it is in Greece's hands to ensure that. Thirdly, a Greek exit would be manageable."
However, Asmussen warned that a Grexit would be costly, not just to Greece but to the entire continent as well. "It would be associated with a loss of growth and higher unemployment and it would be very expensive - in Greece, Europe as a whole and even in Germany," Asmussen said.
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Eurozone Debt Crisis: Will The Grexit Finally Become Reality?
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The Greek Bailout, the CDS Market, and the End of the World
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The terms and conditions of the bond swap Greece agreed to before getting another handout constitutes a theoretical default - but not a technical default.
That's not funny to CDS holders.
Greece hasn't defaulted (so far), but some of the buyers of credit default swaps, basically insurance policies that pay off if there is a default, claim the terms and conditions of the bond swap constitutes a "credit event" or default.
If it is, they want to get paid.
While on the surface this looks like a fight over the definition of a default, underneath the technicalities, the future of credit default swaps and credit markets is at stake.
In other words, the ongoing Greek tragedy is really becoming a global tragedy of epic proportions.
The Next Act in the Greek Bailout?
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The Greek Bailout: Why I'm Mostly Bullish about the Eurozone
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Even Andrew Roberts, a wonderful historian with whom I almost always agree, wrote in the Financial Times that "Europe's fire has gone out."
Today, the markets may welcome the Greek bailout deal, but behind the scenes they still dread the fact it won't work.
Meanwhile, hushed whispers are still being muttered about a Greek default as being "worse than Lehman."
On this subject I am a firm contrarian.
If Greece does default and is thrown out of the Eurozone, then I think Europe is actually due for a rebound - not a collapse.
It's only if they decide to bail out Greece again that I would become less optimistic.
If that is the case, they would be devoting hundreds of billions of taxpayer dollars (or euros, as it were) to propping up an inevitable failure. Even then, Greece is relatively small compared to the growth drivers in the Eurozone, which are strong.
The Problem with the Greek Bailout
What the Greek crisis has shown is that European leaders in Germany and Scandinavia have their heads properly screwed on, but they are not yet a majority of EU opinion.The EU bureaucracy simply gave in far too easily to Greece's first demand for a bailout, then suggested further bailouts for the entire Mediterranean littoral, all of which had over-expanded their governments on the back of low interest rates in the first decade of the euro.
Now reality is returning rapidly to the discussion.
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