A bad start to the year has turned into a disastrous week for Greece. Greek debt talks took another hit on January 24th as European negotiations hit a permanent roadblock. Greece aimed for a last-play debt consolidation through selling new low-coupon bonds, but the EU finance policymakers that needed to okay the deal backed out.
On one level the latest denial for Greek aid is unsurprising. After all, the offer was made by private creditors in Greece, not the Greek government. It was a hasty cobbling of deals and counter proposals which showed more desperation than practical resolution. Of course, a deal could still break through between the floundering nation and the EU ministers, but for now both sides are locked in a Catch-22 of international proportions.
The real hit has been to stocks worldwide. Greek debt negotiation has become a weathervane for the European financial situation. The International Monetary has already cut global growth predictions down to 3.3 percent for 2012, directly blaming the debt problems riddling many European countries. The S&P downgrades have added another level of worry, and though the S&P 500 has been recovering for several days, the latest Greek tragedy sent value spiralling down again.
McDonald's, Peabody (the last major coal producer in the U.S.), and other major stocks fell at least 2 percent after news of the stalemate. The S&P 500 fell 0.2 percent after Greek reports came out, and the Dow lost 0.4 percent of its points as well.
The comparison to the 2002 default of Argentina may be apt, but the Greek crisis is wired into overall European stability, making it part of a greater whole with ramifications beyond what Argentina created. If Greece does default, all of Europe will feel the sting, and the S&P may need to wait a long time for another 5-day growth streak. Expect a lot of eyes on Paris later in the week as Greek creditors meet to form other potential resolutions at the eleventh hour.
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