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What works around here?

By ANTHONY HALL, United Press International   |   Nov. 27, 2012 at 10:16 AM   |   Comments

Finance leaders in Europe are haggling once again over the rescue of Greece with three basic scenarios available.

Compromising aside, one outcome includes creditors accepting losses. That means German taxpayers, who have been fairly disagreeable about rescuing Greece in the first place, will be asked to take a hit. This puts German Chancellor Angela Merkel in a difficult spot given she is up for re-election in 2013.

Option two is to relax targets that the international community has imposed on Athens as mandated criterion for the bailout disbursements to continue. The International Monetary Fund is against the wall on this point. Their bylaws prohibit loans to countries that cannot sustain their debt, The New York Times reported.

Greece is way off the mark. Greek debt is estimated at 175 percent of its gross domestic product and is expected, if the economy doesn't turn around, to reach 200 percent by 2014.

Unemployment in Greece is near 25 percent and the economy has shrunk about 20 percent in the past three years. Further, the Organization for Economic Cooperation and Development predicted as of Tuesday that economic expansion among its 34 members would slow to a trickle in 2013. From a estimate six months ago of 2.2 percent, the OECD now says its members will see growth of 1.4 percent next year.

The third scenario, unbelievable as it sounds, is to provide Greece with larger loans.

As laughable this sounds, currently, as Greece missed budget targets in June, about $57 billion could be sent to Athens from its present bailout package and a new bailout program -- which would be the third -- could also be put together.

There really is a message behind all this, and that is the rescue of Greece simply did not work.

At this point, the countries rescuing Greece include several prominent members of the OECD, the group that says its economic growth next year will be below acceptable, given 1.4 percent growth likely means unemployment will rise across the OECD.

The OECD report calls the weak economies in the eurozone the "greatest threat to the world economy," at the present time.

That means an organism that is the "greatest threat" to everyone else is already in trouble and trying to fix one of its weakest spots. It's good to know that Greece represents a relatively small hemorrhage, but it's less comforting to know that Spain, the fourth largest economy in the currency region, is also facing enormous difficulties. The third largest economy, Italy, watched its borrowing costs soar for much of 2012 and the second largest economy, France, just had its credit rating downgraded.

It bears repeating: The rescue of Greece did not work. This brings us to the solution recommended by the OECD.

Their report said, "Temporary fiscal stimulus should be provided by countries with robust fiscal positions."

At the expense of sounding simple-minded, financial leaders in Europe have spent three years attempting to fix the Greek government's budget, paying no attention whatsoever to the country's economy, which has done steadily worse since the rescue efforts began three years ago.

Is there a turnaround artist out there, that could give Greece a new logo, a new color scheme, a new advertising jingle? That all sounds ridiculous, but it isn't meant to be. If Greece had new owners they would start by saying, "Look at all this potential -- there and there." They would start with what works.

In international markets Tuesday, the Nikkei 225 index in Japan added 0.37 percent, while the Shanghai composite index in China fell 1.3 percent. The Hang Seng index in Hong Kong was off 0.08 percent, while the Sensex in India gained 1.65 percent.

The S&P/ASX 200 in Australia rose 0.74 percent.

In midday trading in Europe, the FTSE 100 index in Britain added 0.18 percent, while the DAX 30 in Germany gained 0.27 percent. The CAC 40 in France slipped 0.12 percent, while the Stoxx Europe 600 gained 0.22 percent.

© 2012 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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