Even though George Papandreou won the confidence vote 153 yes to 145 no, it may already be too late. European debt contagion has already been occurring, and may not be able to be stopped.
With G-Pap bringing up the referendum, his credibility is in question. That very act may have been the domino to set off the match to light the European tinderbox. Forming a new coalition will be challenging, and Samaras is power hungry. We’ll see whether the EU accepts the terms and will still release the 8 billion euros.
The crisis looks like it’s already spreading to Italy, and I expect Italy to be the focus next week. Italian 10-years yields at historic highs(6.3%!), spreads to German Bunds widening, and Berlusconi getting pressure to step down. In addition austerity demands not done, and the G-20 failed to find support for the EFSF, so if contagion continues, where is the firepower going to come from, and will it be enough?
Next week will be interesting to see if the contagion can be contained or whether it will spread like a cancer. Vix still is at 30.16 (above 30). If we fail the 200 day moving average on the S&P, look out below (see the chart of May 2008 where the S&P failed in a similar manner to see what we could be facing)…
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