Op-ed: EU Leaders' Comments Expand Beyond Greece

There are two major messages in statements released Wednesday night in Germany and France about their leaders' conference call with the Greek Prime Minister.

Euro coin in front of the giant symbol of the Euro outside the headquarters of the European Central Bank.
Thomas Lohnes | AFP | Getty Images

The first is that the feet of Greece will be held to the fire on austerity—that Athens MUST deliver on spending cuts, tax rises and speedy privatizations.

They note Prime Minister George Papandreou promised an “absolute determination” to meet all targets.

The implication is that 8 billion euros of previously promised emergency loans will be released by the end of the month— so NO imminent Greek default.

The second message is that both leaders consider Greece an “indivisible” part of the Eurozone.

This seems to promise continued solidarity with Greece—even, perhaps, if Athens did default —that it will still be held inside the Euro Zone. It also promises Greece will NOT be left to fend for itself—that further wealth transfers would be available to, say, keep its banks afloat—either from the ECB or wealthier nations.

More immediately it tells Greek citizens NOT to further withdraw their euro deposits from local Greek banks for fear they'll wake and be told they're being forcefully converted to Drachma and worth perhaps half as much.

And it sends a similar message to the citizens of Portugal, Ireland, Italy or Spain—NOT to cause runs on their local banks—NOT to equate future possible defaults there with exits from the Euro Zone.

For the markets—these statements—taken in conjunction with German Chancellor Angela Merkel's radio interview saying Germany does not want 'disorderly' defaults—push-back against fears of imminent chaos.

A reasonable working assumption is that there will be NO Greek default until October or November at the earliest—because only then will the Euro Zone's 17 national parliaments have ratified an expanded EFSF (European Financial Stability Facility) rescue fund capable of re-capitalizing the Greek banks...and giving Merkel an 'orderly' Greek default.