From the Markets, Another Bronx Cheer for Greece

From the Markets, Another Bronx Cheer for Greece

A 1 euro coin made in Greece and a pile of eurocents.

 Will this ever end?

That seems to be the question exasperated investors are asking after another tedious plot twist in a Greek drama that has lasted far beyond the curtain call.

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The latest Greek election, which some hoped would be a decisive, yes-or-no vote on whether Greece would remain in the euro zone, instead looks like another half-measure that will simply postpone the day of reckoning.

The pro-Europe party won, but only with 30 percent of the vote. The leave-Europe party came in second, with 27 percent of the vote, and its leader vowed to remain a "combative" force, stirring up opposition to the onerous terms that accompany bailout money from Europe. That's likely to leave a weak governing coalition that's vulnerable to a spirited minority party and dyspeptic voters increasingly ambivalent about what political form their misery takes.

Markets hate uncertainty, and the outcome in Greece means there's going to be a lot more of it. The first market reaction to the Greek vote was relief, because a vote to stick with the bailout regime means the euro framework probably won't collapse this summer.

But it could still collapse.

"We may have postponed the inevitable Greek exit another 6 to 12 to 24 months, but this result is not comforting," David Zervos of investing firm Jefferies wrote to clients. "The battle in Greece will rage, and it will surely spill over into the rest of Europe."

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The spillover in other parts of Europe actually continues uninterrupted. Traders worried that Spain's government may need a full-on bailout after the country's borrowing cost rose  to record highs (above 7 percent), a threshold generally deemed unaffordable over the long term. Borrowing costs rose dangerously high for Italy too, due to its own worrisome debt load and a stagnant economy. Investors who had bought euros on the Greek election news changed their minds and sold later on, sending the troubled currency down further against the dollar.

Stocks might have tanked on all the lousy news, except that many analysts think the European problem and the overall economy are now bad enough for the Federal Reserve or other central banks to intervene again, with more quantitative easing or other measures possibly on the way. So stocks are being propped up by thin hope for artificial relief from the pain inflicted by the real economy.

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If there is more central bank easing, it is now likely to produce a short-lived rally followed by the disconcerting realization that there's even less that central banks will be able to do in the future. The politicians in Greece, meanwhile, will still be arguing, with the cacophony there becoming a permanent part of the background noise.

Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.