Will Greek riots and arson spread to Italy and Spain?
The Euro sticking plaster intended to get Sarkosi and Merkel through their elections has peeled off.
The markets reacted strongly to fears that the Greek default will be followed by Italian and Spanish defaults.
When Greece was allowed to default on loans but remain inside the EuroZone the implication was that the problems had all been solved and this was certainly believed in Brussels by the Eurocrats who swallowed their own propaganda. The markets were rather more hard headed and looked for actions to back up the rhetoric.
With nothing happening to back up Euro claims, the markets took a long hard look at Spain and Italy, deciding that they are about to go the way of Greece.
This raises a major question – at what point does a default by one Euro Zone member become a Euro default? With many Greek creditors being banks in the EuroZone, it could be tenuously argued that the Greek default was in internal local matter. The situation in Spain and Italy is very different and the markets are beginning to see that a similar default would have major international consequences and represent a potential Euro default. At that point, it becomes a question of whether the whole Euro Zone is in bound together in default or whether some stronger members might leave the EuroZone and let it sink without trace.