The latest news from Greece is a bit peculiar:
Prime Minister Alexis Tsipras told his new cabinet on Wednesday that he would move swiftly to negotiate debt relief, but would not engage in a confrontation with creditors that would jeopardize a more just solution for the country….Later, the new finance minister, Yanis Varoufakis, appeared to harden the tone, saying that Greece’s bailout deals were “a toxic mistake” and that the new government was determined to change the logic of how the crisis had been tackled.
While many Greeks were hopeful that Mr. Tsipras would follow through with even a fraction of his populist promises, investors were more rattled. The Athens Stock Exchange, which already had billions of euros in value wiped out during Greece’s election campaign, fell around 7.5 percent in midday trading on Wednesday after slumping around 11 percent on Tuesday. Shares in financial companies in Greece plummeted more than 17 percent on Wednesday.
I wonder what has the stock market so spooked? After all, Tsipras is just doing what he’s said he was going to do all along. Everyone expected him to take at least this hard a line on Greek debt, if not harder. So why the sudden panic? Shouldn’t this have been priced in long ago? What’s new here?