Last week, everything looked pretty good. US GDP came in at 2.5% -- not great, but certainly not terrible. And the leaders in Europe actually came up with the framework of a plan to deal with the Greek situation. Frankly, I breathed a sign of relief, and thought, "this looks like the end of the turmoil."
Little did I know the Greek leader would announce he would put austerity measures to a public vote. Now, I understand what he's getting at -- he wants the tough measures to meet with public approval so he can move forward. Theoretically, this will give him the mandate to continue making the tough cuts that Greece, frankly, needs to make.
But what he didn't consider (or maybe he did and simply looked the other way) was this: "what are the effects if the vote fails, and what will happen to the financial markets in the interim period?" The answer is pretty damn ugly -- or, at least more of the same high volatility trading we've been seeing for the last few months. And more importantly, if the vote fails, Greece has probably guaranteed a very messy default which threatens a large number of financial institutions. In short, failure of the vote would really hurt the markets and the macro-economic environment in an incredibly negative manner right at a time that we really don't need it.
In short, this is a bone-headed move that has little upside and massive downside. Thanks. No, really, thanks for this.