Economic Outlook: Still not a default

When a firm goes bankrupt, creditors go scrambling after crumbs; when a country goes bankrupt, it can get mean under the kitchen table.

In Europe, there is talk of lawsuits to force Greece to make good on its bond obligations with vulture funds in London ready to play hardball on debt they purchased at 40 cents to the dollar from European banks, The New York Times reported.

The lawsuits, if filed, would take years to go through the court system in Europe on their way to the last appeal available in the European Court of Human Rights.

The talk of lawsuits belies the public relations spin of last Friday when Greek Prime Minister Lucas Papademos said talks with creditors had broken off to give everyone time to adjust emotionally to losses creditors were being asked to swallow.

As hedge funds discuss lawsuits, a senior government official in Athens said, "This is crunch time for us. The time for niceties has expired. These guys will have to accept everything."

Again, the dance around the word default.

Telling creditors they have to take what's offered or be forced to go to court does not sound like voluntary write-offs in any shape or form.

Greece has been asked by the International Monetary Fund and the European Union to reduce its debt, which now stands at 140 percent of its gross domestic product. Technically, this gets larger every day, as the debt doesn't move, but the GDP shrinks.

Currently, Greece is asking creditors to accept a 50 percent loss on their holdings and lower interest rates, which the Times points out would amount to a total write-off of 60 percent to 70 percent.

There is also a real-time, very specific definition of "crunch time," which is between now and March 20 when $18.7 billion in obligations come due. By then, Greece should have a $38.7 billion bailout check in the mail -- unless its negotiations with creditors fail, that is.

If the talks fall through, the IMF and the EU will not drop that check in the mail. After that, the word volunteer will just be a memory.

In international markets Thursday, the Nikkei 225 index in Japan gained 1.04 percent while the Shanghai composite index added 1.31 percent. The Hang Seng Index in Hong Kong rose 1.3 percent while the Sensex in India gained 1.17 percent.

The S&P/ASX 200 index in Australia lost 0.07 percent.

In midday trading in Europe, the FTSE 100 index in Britain added 0.56 percent while the DAX 30 in Germany gained 0.92 percent. The CAC 40 in France jumped 1.75 percent while the Stoxx Europe 600 index rose 0.97 percent.