The ink was barely dry on the $150 billion European Union/International Monetary Fund bailout of Greece, when world stock markets tanked on two major fears. First, financial analysts are concerned that the bailout money won't be enough to cover Greece's borrowing needs from its out-of-control budget deficit. Second, there are fears that the EU/IMF deal will not be approved by the German parliament in a vote scheduled for Friday.
Additionally, there are new worries that the Greek debt contagion will spread to Spain and elsewhere in Europe. The looming specter of debt default and deflation is heavy in the air for investors worldwide.
Making market matters even riskier,German Chancellor Angela Merkel faces key regional elections this Sunday in populous North Rhine-Westphalia, including the conservative areas of Cologne, Bonn and Stuttgart. These cities hate government debt and overspending as much as the rest of Germany, if not more so.
In fact, we've seen this before. In May of 2008, Bear Stearns was bailed out and we averted disaster for about four months until we couldn't do the same for Lehman Bros. So, if history is any guide, a bailout means run for the hills in equities and they've responded in kind.