The economy is only pausing, but the recovery might take a few more months. The E.C.B. wants to help Italy and Spain. Has Greece's leaving the eurozone already been discounted?

Hard lending? No way.

Industrial production and exports have contracted. The recovery will be gradual, and the Chinese government might cut interest rates one more time by the end of this year. Inventories are high, and the real estate market is weak. Beijing wants to stimulate growth, but measures are not being targeted to overheat the economy so far. Inflation remains a challenge. The GDP is still above 7.5%, and an aggressive stimulus is not on the cards for now. Hard lending is not expected anymore.

In reality, new loans have been weak to date as banks have become more selective. As a result, other financial means have been used to raise money, such as corporate bond financing. The PMI has stayed above 50 as inventories fell in July. Industrial production has been stalling, but activity remains within a comfortable level for now. Retail sales increased more than 13% in July, but exports rose only 1%, way below June's move of 11.3%. The European crisis should keep exports weak, and the Chinese government might step up to promote tax rebates to help exporter companies.

Greece is Europe.

In Europe, the probability of Greece exiting the eurozone within 12-18 months is high. Unfortunately the country cannot make it any more. The contagion to other European countries will be very strong, particularly if the withdrawal happens overnight. Spain and Italy will have to ask the E.C.B. and the IMF for help as yields would potentially skyrocket. The bond purchase program will not be enough to balance bank deposit flights. On the contrary, a soft exit that starts with the end of foreign financing next year will be better accepted by the financial community.

Greece would need to create a parallel way of payment in order to compensate state employees. With time, a new unofficial currency will replace the euro. The moral impact will be huge, and the recovery will take time. Nonetheless, most corporations now have an emergency strategy in place, and the E.C.B. is ready to step in. Greece can recover and start out fresh with the help of other countries. Europe will not make the mistake of leaving a humiliated nation on its own again. History has shown that the consequences can be unpredictable. The U.S. dollar is overbought and should decline over the coming months. The euro could target 1.26 and eventually 1.30.