USA Today reports that “U.S. stocks turned mixed by mid-morning Monday as optimism over Greece’s election results quickly turned to uncertainty over Europe’s ability to withstand tenacious debt problems.”
On Monday, June 18th, European stocks rose slightly only to fall flat. The rise in stocks stemmed from the outcome of Greek elections, which eased fears that Greece would be forced out of the euro to the detriment of Europe and the entire world economy. If Greece is forced out of the euro, the country will most likely default on its debts, causing losses rippling from European banks to the world market: 17 nations currently use the euro. Greek conservatives’ victory in the election means that the country’s austerity program and its international bailout will continue (Greece has relied on loans to operate since May of 2010). Their austerity program, which had to be accepted in order to receive the bailout, includes deep governmental spending cuts and high tax increases. The austerity measures have caused anger among Greek citizens, resulting in protests and strikes. Despite the conservative victory and continued bailout, Greece is not yet out of hot water: the country remains in debt and in a depression, with an unemployment rate of 22%.
A very cautious hopefulness follows this development. According to the article, the “outcome of the election, however tenuous, gives Greece a chance to breathe life into its moribund economy.” As the situation progresses, we will continue to see how Greece’s bailout and the world economy affects the U.S. stock market.