Greece's national football team plays Russia on June 16 and must win, or be eliminated from the Euro 2012 tournament. Tensions are high and police will ring the Warsaw stadium to protect fans from Russian thugs who have been throwing punches, and setting off fireworks in support of their team.
Odds are, in betting shops, that Russia will crush Greece.
Most Greeks will be watching their champions on television because the next day, on June 17, Greece itself faces a life-or-death situation and its voters must decide to pay off their debts and play by the Euro rules, or be eliminated from the Eurozone. Police are also on high alert around the country to protect the public from panic and from the Golden Dawn, neo-Nazi thugs who have been attacking immigrants and leftists.
Odds are, according to stock markets, Greek voters will not vote pro-Euro, but that won't matter. Europe will stabilize the situation and provide liquidity to help Europe weather any meltdown in the weeks ahead.
My guess is that Greeks will watch the game first before they vote, and if their team is humiliated, as expected, they will vote to behave themselves and stay in the Eurozone. If their team pulls off an upset, all bets are off.
Unfortunately, football and finance are dissimilar. There will be no winner after this crisis eventually ends. Germany, with a team that has racked up more victory points in Euro 2012 than any other two football teams combined, will likely win the cup. But irrespective of what the Greeks do, they will have to pony up more money than most European countries in order to keep the Eurozone stable.
This will mark the beginning of the end of the European game -- people who live beyond their means using other peoples' money.
Greece's lefty politicians, and those in France, always like to blame the market as though it was some faceless elite sucking the lifeblood out of ordinary people. But the "market" is comprised of money managers who invest the savings or pensions on behalf of ordinary people. And these managers are simply refusing to lend more money or, if they do, only if they are paid a hefty risk premium.
One institutional player speculated that markets went up yesterday because they are already over the Greek "problem." The country may vote itself out of the Eurozone, but won't leave the European Union where there will be plenty of money available to help the country transition from the euro to the drachma.
The markets may also be betting that the risk-premium contagion won't spread to Spain, Italy and others because next week Europe and the G20 will backstop banks and sovereign nations. This is what they did in December 2008 for banks and in April 2009 for sovereigns, to save the world from America's financial dysfunction.
June 15, Bank of America Merrill Lynch strategists issued a useful "cheat sheet" for investors based on three Greek election scenarios.
1. Their "highest probability" case was that Greece votes in a pro-euro government and does not leave the EU either. If so, the S&P 500 Index remains virtually unchanged, the euro rises and yields on 10-year treasuries climb.
2. Their "low probability" case is that Greeks do not elect a pro-EU government, triggering the European Central Bank to buy bonds, issue a euro bank-deposit guarantee and recapitalize all banks. Strategists project that this would lead to a greater climb in yields on 10-year treasuries, an S&P 500 rally of up to 10 per cent, and a pop on European markets. The euro would jump to 1.30 USD and oil and gold prices would soar.
3. Their "low to medium" probability case would be that Greece rejects the EU and Europe does virtually nothing. That would lead to Greece's exit from the EU, sparking a flight to safety. If that happens, strategists forecast lower stock prices, a euro at 1.20 USD, lower yields on 10-year treasuries and slumping oil and gold prices.
Interestingly, markets seem to be betting on the second or "low probability" scenario which is the rejection of Europe by the Greeks, followed by a massive infusion of liquidity and backstopping by the EU and G20 to prevent panic and collapse.
Belief in Europe that this is the likely scenario is why European markets finished up slightly, gold and oil prices rose and European bank stocks jumped on June 15.
But, like football, forecasting is impossible (unless the games are rigged) which means that anything can happen.
There may be a fourth scenario out there: More of the same or another inconclusive election outcome, more gains by Greek thugs and a paralyzed Europe. If so, that would be a game without a winner.
This blog originally appeared in the Financial Post.