Morici: Crisis Isn't Over in Greece

Today, the Greek Parliament voted in principle to support a five-year austerity plan; however, this does not end the crisis not by a long shot.

Thursday, Parliament votes on article-by-article budget provisions, and watch out that the spending cuts actually approved may not be as large as the plan requires and the budget savings are not enough.

Also, the plan includes a rather ambitious privatization program that is unlikely to be fulfilled. The Greek government is having trouble moving the assets it needs to move, fast enough, and at the right prices. This is a significant chunk of cash that will not become available to pay bills.

Also, 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.

Slower growth and deflation will cause private debtors to default in greater numbers on home, car and credit card loans those will create new woes and spending by Athens.

Bottom like: even if other elements of the austerity fall into place, Athens will soon be short of cash again. Perhaps next year or the year after. Then what does it do?

The voluntary private debt rollover remains sketchy. Even if debt rollover deals materialize without a hitch, the amount of forgiveness will prove inadequate, also increasing the likelihood that Athens will run out of cash again.

The debt rollover may well trigger a default call by bond rating agencies, and swap contracts could yet trigger huge payouts. U.S. banks have written a lot of those swaps.

It could be Lehman Brothers all over again, if bond investors decide to flee Portuguese and Spanish debt enough to force their governments into financing crises.

Peter Morici is a professor at the Smith School of Business, University of Maryland School, and former Chief Economist at the U.S. International Trade Commission.