Troubles in Greece and everywhere

Greece has roughly the population and probably a lower GDP than the City of Chicago, and yet its financial troubles are affecting the US economy. Because there is so much uncertainty about the Euro, the dollar is strengthening, which makes US exports more expensive to the rest of the world.

It looks like Greeks are unwilling to do what it takes to pull themselves out of this mess. The Finance Ministry employees, who, of all people, should understand the severity of the problem and the ways to fix it are on strike, protesting pay cuts. And, yes, George is making sure people know he is Cypriot, not Greek, these days.

A week of labor protests in Greece began with workers from the finance ministry protesting salary cuts as part of the finance minister's ambitious three-year austerity program.

The four-day strike by Finance Ministry officials is expected to affect services ranging from Greece's statistics office to operations at the country's market watchdog, the Hellenic Capital Markets Committee.

At the same time, and more disruptively, thousands of customs officials have declared their own three-day strike starting Tuesday, while tax officials will hold a one-day strike Wednesday.

On Thursday, taxi drivers will also hold a one-day strike, their second in less than a week, while fuel truck drivers have also threatened a walkout for this week.

"What we are protesting is the reduction in wages and also the elimination of the autonomous tax rate enjoyed by ministry employees," said Yiorgos Samaris, president of the Federation of Unions of the Finance Ministry, known as OSYO.

The three-day strike by customs officials is likely to be the most painful strike of the week. The closure of ports and border crossings has sparked fears of crimped exports and imports sorely needed by a country in its worst recession in 16 years. [WSJ.com]

Euro Default

There's a column in today's FT contemplating the default of a Euro-zone country, possibly Spain, Greece or Ireland. All of their bonds have been downgraded in the last few days, fueling speculation on their economic strength. Indeed the Euro is down almost 10% in the last few weeks because of this speculation and fell 1% just on the news of the Spanish downgrade.

A crisis over Greece might be the euro’s ultimate “stress test” (to borrow a phrase from Daniel Katzive of Credit Suisse). If the eurozone could find a way to deal with a default, that might confirm the euro’s status as the world’s next reserve currency.

But if the eurozone could not work out a solution, and a country exited, any such ambition would be over.

The dollar-euro exchange rate affects many other assets.

Now that fears are in the open that Greece (or another peripheral country) could be the Trojan horse that breaks up the euro, any news on this front could shake many other markets.