U.S. growing impatient on Greece debt rescue effort
WASHINGTON (AFP) – The delay in finding a durable solution to the Greek debt crisis is causing impatience in the United States, where there is mixed support for any new bailout.
The US has been watching the Greek situation for more than a year and now is paying closer attention to the latest developments from Germany, France and other EU members with the crisis threatening the overall global economy.
“The US has been closely following the euro crisis since the outset. It has understood the potential upset that it could have on the world and the US economy,” said Domenico Lombardi, senior fellow at the Brookings Institution in Washington.
Officially, the US administration has simply urged Greece to undertake reforms. But some irritation is showing.
US Federal Reserve chief Ben Bernanke said the Greek sovereign debt crisis poses grave threats not only to Europe but to the US and overall financial system.
“If there were a failure to resolve that situation, it would pose threats to the European financial systems, the global financial system and to European political unity,” he told a news conference.
Bernanke stressed that the Fed is not part of the negotiations to resolve the crisis, but has been “kept well-informed,” citing a conference call over the weekend with the G7 (Group of Seven) rich countries on the issue.
Greek Prime Minister George Papandreou is negotiating a new bailout worth some 110 billion euros, as Europe enters a crucial period to ringfence the euro crisis.
While he said it was “too early to give a precise amount,” the final sum would be “similar to the first aid package” in May 2010, which was not enough to prevent the government in Athens from slipping ever deeper into the red.
Greece needs to impose ever more unpopular austerity on a restive people on June 28, with the European Union placing its faith in Athens to clear parliamentary opposition and a general strike.
US Treasury Secretary Timothy Geithner meanwhile called on European Union authorities to speak with a single voice on the Greek debt crisis.
“I think it would be very helpful to have Europe speak with a clear, unique voice over a strategy” to tackle the crisis, Geithner said at a Washington conference.
“It’s very hard for people who invest in Europe to understand what the strategy is when you have so many voices.”
Sheila Bair, head of the Federal Deposit Insurance Corp., said bond investors may need to take a “haircut” on a new Greek aid plan.
“Perhaps that Greek debt needs to be restructured, and people who are holding it are going to have to take some losses,” she said.
Ed Yardeni at Yardeni Research said even though some see the situation as a potential calamity like the Lehman Brothers failure in 2008, Americans are others “are getting weary of watching the Greek drama playing out over and over again.”
“While everyone knows that a Greek default could play out as Lehman II, there is a widespread view that it is inevitable. So let?s get it over with and deal with the consequences,” Yardeni said.
Yardeni said a Greek default “could trigger a Lehman-like contagion” but that “there would also be a Lehman-like response by the ECB (European Central Bank) and the Fed to flood the financial system with liquidity and provide emergency lending facilities to contain the contagion.”
David Kotok, chief investment officer at Cumberland Advisors, said some fears may be overblown.
“Will Greece eventually right its sinking ship? We are skeptical. So are most observers,” he said.
“But we note that Turkey did it and is now a powerful emerging market. We remember the Asian contagion in 1997-98. The world did not end. We recall the collapse of the Russian ruble. We saw the peso crisis in 1994. Full collapse and demise is not a foregone conclusion. Look at the evidence from history.”