Greece's latest economic proposal makes perfect sense, at least to Athens; not so much for the international community.
The strategy so far has been for Greece to sell assets, cut expenses, raise fees and taxes to prove, in effect, that Greece is able to meet the terms of massive international loans.
That went over in Greece like a lead balloon.
Now Greek voters -- although leaders are struggling to form a coalition government -- have given the momentum to leaders who are calling for a plan to stimulate the economy so that it can get back on its feet.
Enough cutting jobs and government spending and heaping on expensive loans and taxes and hoping for the best, the voters are saying. It's not like there isn't some homespun logic behind that.
What the European Union appears to have forgotten is the lesson learned by formerly all-powerful Organization of Petroleum Exporting Countries.
OPEC, although little less powerful in recent years given expanded oil production, learned long ago it could name its price for a barrel of oil. But OPEC also realized if it bankrupts its customers with high oil prices, it only would be hurting itself.
The EU and the International Monetary Fund assembling huge loans for Greece and demanding they cut spending at the same time was a political rationalization all along. The key ingredient was not Germany helping Greece. It was German Chancellor Angela Merkel returning to Berlin after negotiations in Brussels or Paris and telling voters, "We will help Greece, but, boy, they are really going to have to suffer for it."
That kind of tough love sold well for a while. The problem was not enough people stopped to wonder if it was wise to give Greece a loan and cut off its income at the same time. This column kept wondering how the best financial minds in Europe could get together and hand Greek billions of dollars in loans with a formula that sounded like a punch line. "Let's give them billions in loans and cut off their income -- ha, ha, ha," might be a good joke during lunch at a convention of bankers. Surprisingly, it was also the formula in Europe.
Europe demanded Greece sell assets, including beaches, railroads and airports (some of which might make money) and lay off thousands of workers, which meant lowered tax revenues and increased demand for social services, in return for huge loans, albeit loans with fair interest rates. Any first year student in finance care to take a crack at that one?
Now Greece is looking for permission to cut austerity measures and push (or nurse) its economy back to health or it will leave creditors empty-handed.
In other words, the thanks the EU is getting after three years of hard work sounds like blackmail.
The truth is, it is way too far down the road for any easy transition to take place. Greece leaving the eurozone will be painful and very expensive. Greece staying in the eurozone will be destructive and even, potentially, mutually destructive if Europe cannot contain the damage.
And don't forget, this is helping Greece, a situation in which slow motion has become an art form.
In international markets Friday, the Nikkei 225 index in Japan lost 2.99 percent while the Shanghai composite index in China fell 1.44 percent. The Hang Seng index in Hong Kong lost 1.3 percent while the Sensex in India rose 0.51 percent.
The S&P/ASX 200 in Australia lost 2.67 percent.
In midday trading in Europe, the FTSE 100 index in Britain gave up 0.74 percent while the DAX 30 in Germany rose 0.17 percent. The CAC 40 in France shed 0.14 percent while the Stoxx Europe 600 lost 0.58 percent.
|Additional Analysis: Economic Outlook Stories|
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