Greek prime minister George Papandreou has called for a voter referendum in early December. However the wording of the referendum is still in question.

If Papandreou is smart, he will stick it Angela Merkel and Nicolas Sarkozy with two distinct questions, the first on the Eurozone, the second on terms of the EFSF bailout.

Please see Brilliant Moves by Papandreou; EMU Mentions Eurozone Exit Possibility First Time Ever; Who the Hell is Merkozy to Dictate Terms of a Greek Referendum? for a discussion.

It is conceivable I gave him too much credit. We will find out soon enough when the exact wording of the referendum is released. I suspect we may not see the wording until after the vote of confidence.

Papandreou must first survive a vote of confidence on Friday. Assuming he does survive, will the markets wait a month for resolution to the referendum?

We have strong hints this morning from the bond market that it won’t.

Italy 2-Year Government Bond Yield

Italy 10-Year Government Bond Yield

Spain 2-Year Government Bond Yield

Spain 10-Year Government Bond Yield

2-Year Government Bond Yield

10-Year Government Bond Yield

Unless something changes in a hurry, yield on Italian 10-year bond will be North of 7% and perhaps even 8% by the time the referendum is held.

Mike “Mish” Shedlock
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