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Time to Say to Greece: You Can’t Have It Both Ways

The Parthenon in Greece
Scott E. Barbour | Getty Images
The Parthenon in Greece

It's time for Europe to say to Greece: You can't have it both ways. Most Greeks say they want to stay in the European Union, they just don't want austerity or the bailout package. They are playing a game of chicken by electing such extremist parties. They seem to be betting that Europe will come to their rescue and provide them with bailout funds, even if they reject the bailout package.

How can that happen? The package was granted on exactly the condition Greece would rebalance all its public finances.

Here's an interesting factoid mentioned in The Wall Street Journal today: Even if Greece stopped repaying all of its debt, it would still be spending more than it takes in.

The country is completely dependent on European aide. It has been for a while: The Greeks have not been able to finance their economy without help since May 2010.

The betting today: No government will be formed from this election, another election will be held on June 10 or June 17, the Left Coalition (Syriza's) populist rhetoric has momentum, and it may win as left voters from the Communists and Democratic Left vote for it.

The other alternative: The country cannot form a government even after the election in June, and another round of elections has to take place.

It's time for the rest of Europe to weigh in. European leaders seemed paralyzed watching the Greek elections, they seemed unwilling to say anything that might be seen as internal meddling.

That was clearly a mistake. European leaders have got to step in and make it clear: This is a referendum on staying in or out of the club. If you elect the parties that want to repudiate the bailouts, that's fine, but you don't stay in the euro.

Elsewhere:

1) No one wants austerity, even in Ireland. That country has done everything Europe asked it to do ... and suffered mightily for it. Now the country is set to vote at the end of the month on the EU fiscal discipline pact. Sinn Fein, the political wing of the old IRA, is gaining ground on opposition to the treaty, as well as opposition to any more budget cuts and taxes.

2) Europe already pricing in significant risk. While the S&P 500 is down less than 4 percent from its recent high, Europe is not so lucky — even core countries are now down double digits, with Spain and Italy down more than 20 percent. I know, there's no such thing as decoupling, but still...

Index % Change From Closing High

S&P 500 -3.9% (April 2)
Spain -24.0% (Feb. 9)
Italy -20.3% (March 19)
France -13.9% (March 16)
Germany -10.4% (March 16)

3) Macy’s drops 4.3 percent pre-market after the retailer beat earnings estimates on higher same-store sales, but failed to up 2012 earnings per share guidance. Macy's reported first-quarter earnings per share of $0.43, compared to the Street’s $0.40 view. Strong online sales drove the retailer to post a 4.4 percent rise in first-quarter same-store sales and raise its 2012 comparable-store sales forecast by 0.2 percent to 3.7 percent.

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