Given the rapidly evolving events in the burgeoning crisis involving the European Union and Greece, I thought you might be interested in my article in this morning’s The Huffington Post/World Post, “Averting a European Tragedy: Why President Obama Has Gotten It Right.” As you will note, this matter is of significant economic and strategic importance to our country as the President has rightly recognized.
Averting a European Tragedy: Why President Obama Has Gotten It Right
Chairman, Financial Crisis Inquiry Commission
In the seventeen days since the Greek national elections brought Alexis Tsipras and his SYRIZA party to power, the Eurocrisis has once again taken center stage, threatening not just the future of the unified currency and the European ideal, but also global economic and strategic stability.
True to their electoral promises and bolstered by growing public support at home, Prime Minister Tsipras and Greece’s new finance minister Yanis Varoufakis have vowed to bring an end to the European imposed austerity policies that have driven Greece into an economic depression, just as they have crippled the European economy as a whole. For their part, European officials indicated an early intransigence to shifting course, an intransigence that apparently continued through yesterday’s meeting of finance ministers in Brussels. In that meeting, German officials reportedly refused to accept that the conditions imposed by previous agreements, no matter how ill conceived and how demonstrably unsuccessful, might be amended, thus derailing prospects for discussions in the next few days. A fateful decision looms, possibly as early as Monday.
In the midst of this burgeoning crisis, President Obama has been a voice of reality and reason, calling for an agreement that will restore economic growth in Greece and keep Greece in the European Union. The president’s forceful messages recognize that the crisis at hand is about much more than one nation’s membership in the EU, but rather about protecting a global economy still fragile from the effects of the financial crisis and ensuring the strength of the Western alliance in these times of increasing peril.
There is no question that the current austerity program imposed on Greece as the price of financial aid has been a failure. Official unemployment is nearly 26%, a jobless rate mirroring that in the U.S. during the Great Depression. Youth unemployment has soared above 50%, contributing to a brain drain that could cripple the nation for decades to come. The Greek economy has shrunk by more than 25%, with millions of Greeks now in poverty and essential social services in tatters. It is a testament to the fierce democratic ideals of the Greek people that the nation has not exploded in rage and revolution.
There is also no question that Greece has made enormous fiscal adjustments in the past few years, by far the largest in the Eurozone. Its deficit is now below 3% of GDP, down from 15% in 2010. Its primary budget surplus has reached 1.5%. But the European imposed primary surplus targets of 4.5% of GDP over the medium term and 4% over the long term will strangle economic recovery. As President Obama so rightly noted, “when you have an economy that is in free fall there has to be a growth strategy and not simply the effort to squeeze more and more from a population that is hurting worse and worse.”
Facts, reason, and fairness call for a new agreement to foster reform and recovery in Greece and to preserve the European Union. Any viable agreement must respect Greek sovereignty and must reflect good economic judgment. It must lower primary surplus targets, as proposed in the plan submitted by the Greek government, to permit investments that alleviate suffering and spur growth. It must provide a sustainable path to debt repayment in the short and long term. And it must continue the push for reforms that strengthen the socioeconomic fabric and economic progress. In this regard, the new Greek government has committed itself to fighting tax evasion and corruption, increasing public sector transparency, improving government efficiency, and encouraging foreign investments which build, not deplete, the wealth of the nation.
To achieve these goals, the escalation in tensions and rhetoric, which invariably are amplified in media coverage that naturally favors contention and conflict, must be tamped down. A bridge or cooling off period to reach a new accord, during which the Greek markets, economy, and banks can be stabilized, is needed to allow for thoughtful, good faith negotiations on revamping the agreements between the parties. This is what the new government is requesting.
On this score, continued leadership by President Obama and the U.S. government can help in bringing the parties to the table and to keeping them there until a fair resolution is reached. The course of active engagement on which the President has embarked is in the nation’s interest for three reasons.
First of all, the unraveling of the European Union at this critical moment would put at risk our own economic recovery after years of stagnation in the wake of the financial meltdown of 2007-2008. Contrary to the defeatist views of the likes of Alan Greenspan, the inevitability of EU dissolution should not be accepted as fate.
Secondly, the exit of Greece from the European family of nations would be a significant geo-strategic setback. Greece has been and remains a dependable U.S. ally and a vital partner in the NATO Alliance. Sitting on the southeastern flank of Europe and on the front lines next to the Middle East, it is a critical staging base for the protection of Western democratic interests at a time of increased volatility, armed conflict, and terrorism in the region. A Greek departure from the European Union and a downward spiral of the Greek economy will lead to no good end for the West.
Finally, deploying our good offices to help Greece emerge from its economic and humanitarian crisis sends a strong signal about this nation’s commitment to democratic principles. In the cause of liberty, the Greek people fiercely resisted a brutal Nazi invasion and occupation, survived a ruinous civil war with Communist forces, and overthrew a military junta that robbed the country of its freedoms. Helping Greece and our European partners to find a just resolution to today’s crisis honors those struggles.
In 1947, President Harry Truman called upon the Congress to enact the Truman Doctrine that saved Greece from ruin and tyranny during the civil war with the Soviet backed Communist forces. In doing so, he warned, “If we falter in our leadership, we may endanger the peace of the world. And we shall surely endanger the welfare of this nation.” Much has changed in the seven decades since Truman saved Greece for democracy. But this much has not: a democratic Greece tethered to the West matters.
Phil Angelides served as California State Treasurer from 1999-2007 and as Chairman of the U.S. Financial Crisis Inquiry Commission, which conducted the nation’s official inquiry into the causes of the global and U.S. financial and economic crisis.
Chairman, Financial Crisis Inquiry Commission, July 2009-February 2011