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With Europe Back in the Spotlight Investors Run for Cover

America's post-election glow didn't even make it to the opening bell. After meandering near the flat-line all night markets were slammed when ECB President Mario Draghi said he was anticipating weakness in the European economy for the foreseeable future. Draghi's remarks came ahead of efforts by Greek officials to pass yet another austerity package in order to avoid economic collapse. In the face of such uncertainty traders decided discretion was the better part of valor and sold off stocks by more than 2% in early trading.

David Lutz, managing director and head of ETF trading at Stifel Nicolaus, thinks investors better get used to negative news out of Europe. "We're really coming down to the end of the game right now to see if Greece is going to be staying in the eurozone and getting some capital," he says.

Greek unrest brings back the negative cycle that dominated 2011 --a U.S. recovery stymied by our main trading partner not just slumping economically but potentially ceasing to exist in current form. More discouraging still, Lutz says Greece is only 3/4 of the way through a process that has lasted years already.

Now as it was last year, Germany holds the key. The German economy has been on a very slow descent into a recession for more than a year. Having the eurozone intact has been to Germany's benefit as long as exports remained strong. Should the German economy going into a free-fall, German officials are unlikely to be able to keep selling the citizenry on the idea of subsidizing Greece.

In the near term Lutz is watching the ECB tomorrow for evidence that the nascent central bank is willing to ease rates. The Street isn't expecting such stimulus, but with inflation fears somewhat mitigated and economic data going south, an incremental move would be welcomed.

There isn't a final deadline for when Europe makes a definitive decision regarding Greece or, for that matter, the rest of the PIIGS. The efforts to kick the can down the road are all about buying time for the economic cycle to kick in and bail out Europe organically. As evidenced by today's sell-off, Wall Street isn't a patient place.

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