Oil price continues to sell off as the odds of a Greek default continues to rise. The euro is under pressure causing the dollar to rise adding to the weakness in the sector. Last week word that Germany was making a contingency plan for a Greek default and the resignation of Juergen Stark of Germany led to speculation that a Greek default is inevitable and the fate of the euro-zone is in doubt. German Chancellor Angela Merkel's government is making plans to beef up German banks if Greece fails to meet the terms of its aid package and defaults on debt. The markets are dealing with speculation that Juergen Stark resigned from the European Central Bank's Executive Board because of the bank's bond buying program and the possibility that Germany is going to walk totally away from a Greek bailout.
Paul Krugman of the New York Times is adding to the uncertainly by saying that, Financial turmoil in Europe is no longer a problem of small, peripheral economies like Greece. What's under way right now is a full-scale market run on the much larger economies of Spain and Italy. At this point countries in crisis account for about a third of the euro area's G.D.P., so the common European currency itself is under existential threat...... it's all coming to a head. We're not talking about a crisis that will unfold over a year or two; this thing could come apart in a matter of days. And if it does, the whole world will suffer.
The whole market is suffering as stocks around the globe take a hit. If stocks fall and fears rise, then capital in Europe may begin to freeze up.
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