Economic Outlook: Insomnia

By ANTHONY HALL, United Press International  |  June 30, 2011 at 8:51 AM
share with facebook
share with twitter

Members of parliament in Athens approved an austerity budget proposal that did not give skeptics much rest Wednesday night.

Stocks did well around the globe Wednesday, even in Asia in anticipation of the Greek Parliament approving the measure, which called for Greece to sell about $70 billion in assets and find a combination of tax hikes and spending cuts to save $40 billion per year.

The question Thursday, now that the austerity measures were agreed to in principle, is can Greece actually implement what was proposed.

The quick answer is no. Legislators have agreed to sell assets that include four Airbus jets, a state horse-racing business, water companies and 34 percent of its stake in TT Hellenic Postbank, The Wall Street Journal reported.

This is barely a scratch in the actual list of items for sale -- gas monopolies, a one-time Olympic venue, an airport that is essentially abandoned, a golf course that hasn't made money 30 years, a railroad, some office chairs and beach front property. "Hundreds of miles of roads," the Journal said. Thousands of acres of land.

On Thursday, legislators approve the actual spending cuts line by line, a more tedious and potentially more hazardous chore than agreeing to spending cuts in principle.

This all occurs in a country notorious for its low tax collection rate. What times zero equals $40 billion?

For that matter, what times zero equals $70 billion. Greece has had difficulty selling some of its assets for years, raising $14.2 billion since 2000. That's not zero, but it's a far cry from $70 billion and the urgency is significantly more today.

The more important question is what is Greece doing -- not in the past, but this week -- to shoot itself in the foot? "The budget savings likely will fall short of their goals, because the spending cuts will result in slower growth and less tax revenues than expected," wrote University of Maryland economics professor Peter Morici.

That is true in principal, but the devil is in the details. Can the likes of Donald Trump turn a golf course on the island of Rhodes into tax-paying money-maker? That seems a tall, but not necessarily Herculean task. How about four ports owned by the government, a railroad, a bank and some old roads? Soon it looks vaguely Olympian. "Athens will soon be short of cash again. Perhaps, next year or the year after," Morici wrote. "Then what does it do?"

In international markets Thursday, the Nikkei 225 in Japan gained 0.19 percent, while the Shanghai composite index in China rose 1.23 percent. The Hang Seng index in Hong Kong rose 1.53 percent, while the Sensex in India added 0.81 percent.

The S&P/ASX 200 in Australia gained 1.73 percent.

In midday trading in Europe, the FTSE 100 index in Britain rose 0.4 percent, while the DAX 30 in Germany lost 0.11 percent. The CAC 40 in France was up 0.14 percent, while the Stoxx Europe 600 index added a pinch, up 0.03 percent.

Related UPI Stories
Trending Stories