Plan B for Greece

In politics, there is little that is more efficient than the statement, that packaged news brief that sums up the meetings that went on behind closed doors.

Interestingly, on Tuesday, German Chancellor Angela Merkel and French President Nicolas Sarkozy discussed the debt crisis in Europe only to decide afterward that no statement was necessary. That statement, which was vetoed by Berlin, was expected to say something on the strength of French banks, which are dangerously exposed to the debt crisis in Greece.

Such a statement was viewed as unnecessary, The New York Times reported. On Wednesday, however, Moody's Investors Service seemed to say, "We'll take it from here," and slapped two of of the largest French banks, Societe Generale and Credit Agricole SA, with downgrades, dropping Societe Generale from a rating of Aa2 to Aa3 and Credit Agricole from Aa1 to As2.

Moody's left BNP Paribas with a Aa2 rating, but said it would continue to review the French bank's credit status.

Financial leaders from Europe are, meanwhile, stuck in the role of playing both sides against the middle, trying to find soothing statements to send to the press, but not denying the problem is huge. Merkel said Wednesday Germany had no plans to force Greece into bankruptcy or expel it from the eurozone.

"I think we will do Greece the biggest favor by not speculating much, but instead encouraging Greece to implement the commitments it has made," The Wall Street Journal quote Merkel as saying.

"What we don't need is unrest in the financial markets -- the uncertainties are already big enough."

What Merkel is selling, however, is confidence in a country where economic output is forecast -- by Athens, no less -- to shrink 5.3 percent in 2011.

Austerity measures have already taken much of the wind out of Greece's economic sails and those sails were already luffing when this all began. In the background, economists such as Peter Morici at the University of Maryland are wondering out loud why politicians are not viewing default and a break from the eurozone as a solution, rather than a failure.

Tying weaker economies -- Greece, for example -- to the likes of Germany and France has all along set up a slanted parity with the larger economies keeping the euro strong, which works against the peripheral nations, such as Greece, Belgium, Portugal and even Spain.

Now, with a possibility of a Greek default, the stronger nations are riding to Greece's rescue with terms that require Greece to sell assets and lay off thousands of workers -- not exactly the fast lane to recovery.

Breaking from the eurozone, however, could allow Greece to adjust the value of its own currency to make the country economically competitive again, virtually overnight.

In international markets Wednesday, the Nikkei 225 index in Japan fell 1.14 percent while the Shanghai composite index in China added 0.55 percent. The Hang Seng index in Hong Kong was flat, climbing 0.08 percent while the Sensex in India gained 1.47 percent.

The S&P/ASX 200 index in Australia fell 1.64 percent.

Stocks rose in Europe. The FTSE 100 index in Britain added 1.65 percent while the DAX 30 in Germany climbed sharply, up 3.05 percent. The CAC 40 in France rose 2.12 percent while the Stoxx Europe 600 index gained 1.8 percent.