The Euro has been crashing and will swing wildly with every Greek opinion poll until the next election. Yields are rising in Spain and Italy and this trend will continue as long as bond traders expect Greece to be ejected.
Although some European economies are victims of real estate bubbles, many of the region's troubles are self-inflicted. The EU has been dithering about how to handle the crises for three years and providing nothing but half measures and stopgap "solutions". This has to end or things will continue to get worse before they get better.
As soon as the campaign in Greece restarts the rest of the continent has to make it clear and be unequivocal that the vote is about being inside or outside the Euro zone and nothing else. Even if there is room to give Greece some breathing space on austerity measures it must soon be made clear that loosening of conditions will only apply if there is a pro-bailout government. Even then, Greece may breach some debt covenants before it has time to complete a new vote, assuming that vote results in some sort of coalition.
Many of the debtor nations have been and are making larger strides in dealing with their debt overhangs. The market won't care about this if bond traders get to play "who's next?" if there is a Greek exit. Greece should have been ejected from the EU three years ago. That didn't happen so northern Europeans and particularly Germans will have to be prepared to do what it takes to hold the zone together or face the consequences.
Most Greek debt is no longer held by banks. There would be fallout in the swap markets but if the February deal is anything to go by it will be smaller than many fear. The important thing is to ensure the bond markets for other peripheral countries are protected. The ECB should be prepared to extend unlimited (and we mean unlimited) buying power in defense of Europe's bond markets. It's much more important to ensure Spanish, Italian and French bonds don't crash than it is to save Greece. Tough sledding, but that's just how things are.
Until there is some visibility in Europe gold and other commodities will track the Euro and resource stocks will continue to see fear and liquidity generating selling. It's depressing to see an avoidable problem blow up yet again. Time really has run out for Greece and for Europe. Let's hope cooler heads prevail-very soon.