Economic Outlook: Greece looks gone

By ANTHONY HALL, United Press International  |  Sept. 5, 2012 at 10:25 AM
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When do you take the patient's hand and feel for a pulse, then look at the clock and note the time?

Beloved Greece all but officially departed the currency region called the eurozone on Wednesday, Sept. 5, 2012, as soon as a letter from international creditors was leaked to the British newspaper The Guardian.

The letter spelled out new labor reforms in return for $37.6 billion in additional loans, but also noted that Greece had not yet managed to cut $14.5 billion from its budget that Athens was supposed to eliminate by June.

Last week, Greek Prime Minister Antonis Samaras made the rounds, suggesting to various leaders that Greece does not need more money, but only time to meet its international mandates.

The details make that clear today. But the letter also implies, with no judgement implied here, that Greece is reluctant or unable to do what the international community has required.

That same group of creditors, as spelled out in the letter, is now asking for additional labor reforms, which will likely find fierce opposition among Greek union members.

Those arguments need to run their course, but the international community is in no mood to wait for Greece to sort out its domestic problems.

One way to understand this is to look at the differences between the eurozone -- the 17 countries that use the euro as currency -- and the United States.

On this side of the Atlantic, if Ohio were to fall into default, no one in Washington would say, "Let's figure out whether we should kick Ohio out of the union or not."

If Ohio or North Dakota or Texas or Georgia or even Detroit, Mich., were to fall into default the automatic understanding would be that they could take whatever time they need to pay the federal government back.

Nobody is going to cut Ohio or Detroit out of the union if it is behind on its payments to Washington.

That said, just considering the option of cutting Greece loose from the eurozone is to admit that it is all over for Greece but the crying.

As of this week, the troika, which represents the International Monetary Fund, the European Central Bank and the European Commission, has demanded Draconian labor reforms in a country that did not meet its fiscal targets as of June.

Yes, there were two national elections to process, but it has taken until September for the details of Greece's new foibles to come into focus.

In the meantime, while Samaras made the rounds last week asking for more time, German Finance Minister Wolfgang Schauble claimed that Europe had given Greece enough time and enough money.

Time, he said, would not fix anything. Tossing money at Greece was, in point of fact, tossing good money after bad, he said.

German Chancellor Angela Merkel in the same week told members of her own political party to quit entertaining the option that Greece might be cut out of the eurozone.

That sounds like Merkel and Schauble are not on the same page, but they are both hinting at the same outcome. To suggest Greece is gone is unwise because it establishes the option. It's like painting a tunnel and railroad tracks on a mountainside in a cartoon and having a train drive on through.

For Greece, the writing is on the wall or, put another way, the tunnel with the train tracks has been painted on the mountainside. The troika's letter was not a blueprint for a successful Greek turnaround. It was, in fact, an eviction notice.

Nurse note the time. Somebody order the cold cuts. It looks like Greece is gone.

In international markets Wednesday, the Nikkei 225 index in Japan fell 1.09 percent, while the Shanghai composite index in China dropped 0.29 percent. The Hang Seng index in Hong Kong shed 1.47 percent, while the Sensex in India lost 0.73 percent.

The S&P/ASX 200 in Australia lost 0.57 percent.

In midday trading in Europe, the FTSE 100 index in Britain was flat, dropping 0.19 percent, while the DAX 30 in Germany rose 0.45 percent. The CAC 40 in France gained 0.22 percent, while the Stoxx Europe 600 added 0.16 percent.

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