US president says it is in world’s interest for Greece to stay in eurozone and praises EU as ‘one of greatest political and economic achievements of modern times’
The Guardian
The US president, Barack Obama, has signalled he will use a critical two-day visit to Athens this week to step up calls for the country to be given “meaningful debt relief”.
Weighing in on the potentially explosive issue of how best to revive the European Union’s most financially strained member state, the outgoing president said debt forgiveness would play a pivotal role in giving people hope. “I am a strong believer that to make reforms sustainable, people need hope,” he told the Greek newspaper Kathimerini before the trip, which will be his final state visit before leaving office. “The International Monetary Fund has said that debt relief is crucial to put Greece’s economy on a sustainable path and set the stage for a return to prosperity.”
Obama, who has blamed the excoriating effects of austerity on Europe’s slowing growth, said while Athens needed to implement reforms, a nominal write-down would help reignite an economy that has lost over 25% of its output since the nation’s financial woes first surfaced seven years ago. At around €330bn (£284bn), or 180% of gross domestic product, Greece’s staggering debt is by far the biggest in the EU.
“That is why I will continue to urge Greece’s creditors to take the steps needed to ensure the country is well placed to return to robust economic growth, including by providing meaningful debt relief,” he said in the interview. “Getting that done would not only fuel the Greek economic recovery, it would show that Europe can make its economy work for everyone.”
Obama is the fourth US leader to visit Greece. Amid heightened fears of terrorism following a hand-grenade attack on the French embassy last week, and planned protests by anti-capitalists, security in Athens is expected to be immense. One neighbourhood with leftist affiliations in the heart of the capital has pronounced Obama “person non grata” while communists, anarchists, students and womens’ group have all pledged to take to the streets.
But the Greek prime minister, Alexis Tsipras, a once fiery anti-austerity communist himself, has set much store on the visit.
Although the timing of the trip essentially renders Obama a “lame duck” president, the leftist-led government is relying on his backing – and appeal – to persuade Germany, Europe’s powerhouse and the biggest provider of rescue funds to date, of the import of moving ahead with debt relief. After Athens, the US president flies straight to Berlin where he will dine with chancellor Angela Merkel on Wednesday.
Greece, the recipient of three bailouts since 2010, has undergone brutal belt-tightening with successive rounds of budget cuts, tax rises and pension reforms in exchange for over €300bn in emergency funding. The depression-era downturn triggered by the policies has caused unprecedented levels of poverty and unemployment.
Tsipras, whose popularity has plummeted as a result of enforcing measures he once promised to eradicate, has now made debt relief a priority. In recent months he has ratcheted up the rhetoric, calling for an agreement to be reached by the end of the year.
Athens, which is currently undergoing a second review of its economy, has been told debate on the issue can open once the inspection is concluded.
With the government also seeing debt forgiveness as vital to ending economic uncertainty and attracting much-needed investment, Tsipras is keen to get a deal by the time eurozone finance ministers meet for the last time this year on 5 December.
Although few believe that will be possible, a strong message of support from Obama could facilitate talks in the coming weeks. The US president admitted he had played a seminal role in preventing Greece from being ejected from the single currency at the height of the euro debt crisis. “I have strongly supported efforts to keep Greece in the eurozone because I share the view of the vast majority of Greeks that this outcome is in Greece’s best interest,” he told the conservative daily. “I believe that European integration is one of the greatest political and economic achievements of modern times, with benefits for EU members, the United States and the entire world.”
Debt relief is also regarded as crucial to including Greece in the European Central Bank’s quantitative easing program, itself essential to lowering borrowing costs and improving the cash-starved economy’s liquidity. If the debt load is viewed as unsustainable, it will be impossible for Athens to re-enter capital markets when its current rescue programme expires in 2018, the country’s central banker, Yannis Stournaras, has also said.
“Obama’s visit comes at a crucial time. On a symbolic level he can show there is support for the idea of debt relief and remove the moral hazard element from the discussion,” said Nick Malkoutsis at Macropolis, an economic analysis website. “If debt servicing costs are reduced, it would allow primary surplus targets [set by lenders] to come down which would lead to less pressure on the economy.”
But as has always been the case in Europe’s seemingly never-ending debt crisis, it is Germany that calls the shots. Berlin’s hardline finance minister, Wolfgang Schauble, has repeatedly ruled out debt relief until after next year’s general elections at the earliest.
Yet Greece has won an unlikely ally in the form of the International Monetary Fund, which has refused to sign up to the country’s third bailout – agreed after months of tortuous negotiations 18 months ago – until the debt question is resolved.
“Debt relief for Tsipras would be a huge win in the Greek political calculus,” said Alec Mally, an economist and former US diplomat based in Athens. “Even if America can’t deliver it per se it can help support Greece in the IMF and press the point in discussion with European leaders and that is clearly what Obama is trying to do.”
No comments:
Post a Comment