As leaders of the European Union meet this weekend to decide on whether Greece is to be ejected from the eurozone, Washington is pulling out the stops to prevent such an outcome.
What is alarming Washington is not the technical, financial arguments over Greece’s eligibility to remain inside the EU’s monetary system. Nor, we can aver, are the pressing human concerns about the poverty-stricken Greek people from the collapse of their country’s economy. What has the US rattled is that the monetary crisis in Europe could lead to much bigger geopolitical consequences: in particular, the EU’s bickering threatens to unravel Washington’s carefully constructed anti-Russian agenda in which, for the US, a coherent Europe plays a vital role.
If the Greek financial crisis spreads to other EU member states the result could see the 28-member bloc become riven with acrimonious splits; splits that will crack wide open to undermine the American strategy of trying to isolate Russia through a US-imposed cleavage between Moscow and the rest of Europe. Even the future of the US-led NATO military alliance could be at risk if the EU financial crisis gets out of control.
The main target for US diplomatic efforts at keeping the 19-member single-currency system together is Germany. Berlin’s insistence, led by Chancellor Angela Merkel, that no debt write-off can be afforded to Greece is raising the stakes that Athens will be forced into a»Grexit» from the eurozone. Germany, along with Latvia and Lithuania, has been strident in its demands that Greece must pay off its debts in full through a mixture of austerity and «fiscal consolidation».
The Greek government of Alexis Tsipras, on the other hand, says that there must be a substantial measure of debt write-off for its continued membership. Tsipras seems prepared to cave in on the question of exacting more austerity from the Greek population. Nevertheless, his avowedly anti-austerity Syriza government will not survive the Greek electorate if it doesn’t also deliver on a major debt write-off for the nation in order to mitigate the next round of austerity cuts – a debt write-off that would perhaps amount to one-third of the total, or around €100 billion.
To that end, Washington is pushing Berlin to relinquish its hardline creditor position, and to make concessions on the Greek debt that would involve at least a partial cancellation of its €320 billion total arrears.
This week, ahead of the EU «deadline summit» scheduled for Sunday, the Obama administration and the Washington-dominated International Monetary Fund (IMF) issued strenuous statements urging Germany to give way on debt relief.
The Financial Times reported: «US Treasury Secretary Jack Lew and the IMF’s Christine Lagarde on Wednesday sought to increase pressure on European [German] leaders to grant debt relief to Greece and help the country avoid an exit from the eurozone. In separate interventions in Washington both said it was clear that Greece was in need of a ‘debt restructuring’ in an implicit call for Germany and others to drop their opposition to any forgiveness of Greek debts».
Noting that «the US has become an important advocate for granting Greece debt relief», the FT added: «Warning that a Greek meltdown would cause hundreds of billions of dollars of economic damage around the world, Jack Lew issued the Obama administration’s loudest call yet for compromise».
For several weeks now, Washington has been urging EU leaders and Athens to come up with a financial solution to the crisis, and one that keeps Greece within the eurozone.
In another report this week, the Wall Street Journal headlined: ‘Obama Urges Germany, Greece to Compromise on Emergency Financing’.
«President Barack Obama on Tuesday urged German Chancellor Angela Merkel and Greek Prime Minister Alexis Tsipras to compromise on an emergency financing deal that could keep Greece in the eurozone,»reported the WSJ.
According to the WSJ: «White House spokesman Josh Earnest said the president was encouraged by assurances from both leaders in separate phone calls that ‘it’s in their collective and mutual interest for Greece to remain part of the eurozone’».
Obama reportedly stressed in the phone call to Merkel «that the only way that we’ll succeed in achieving that goal is for all of the parties to agree to a package of reforms and financing that puts Greece back on a path toward economic growth and debt sustainability’».
The phrase «debt sustainability» entails cancellation.
In the Financial Times’ report cited above, the US Treasury Secretary Jack Lew is quoted as saying: «There’s a lot of unknowns if this goes to a place that completely melts down in Greece. I think that is a risk that the Europeans and global economy don’t need. I think geopolitically it would be a mistake».
Alluding to the bigger, underlying concerns, the Wall Street Journal warned about the consequences of a Greek exit from the EU currency:»That prospect worries the US. Not only could the Greek crisis weigh on US exports and fuel market turmoil but also a Greek exit could raise geopolitical concerns as Athens rekindles ties with Western foe Russia and risks turning into a failed state».
So, reading between the lines here, it soon becomes clear that it is the «geopolitics» of the EU crisis that is most animating Washington, and how that relates to Russia in particular.
The real US perspective was spelled out in a Voice of America report dated on June 29, when the current crisis came to a head between the Berlin-led EU creditors and Greece. VoA quotes Gary Hufbauer, from the hawkish Washington-based Peterson Institute for International Economics, who said the US government is alarmed over the potential wider implications of the Greek financial crisis.
Hufbauer said: »The US is concerned that the chaos in Greece could be infectious and will lead to doubts about Portugal and Spain and Italy and cause trouble, and will cause disunity in Europe’s resolve with respect to Russia over the Ukraine situation».
Such disunity in Europe, which the US fears, would inevitably unravel the anti-Russian economic sanctions that the EU has implemented, primarily at Washington’s beckoning since the Ukraine crisis erupted last year. The disunity would also undermine the US-led policy of NATO hostility toward Russia that Brussels has adopted and to large extent has imposed on the European bloc despite the misgivings of several EU member states.
The tensions over the EU financial crisis are driving a fundamental contradiction between Washington and Berlin. Germany is concerned that if any debt write-off is afforded to Athens, then other equally indebted countries in the EU will also want similar massive debt cancellation. As the biggest creditor in the EU bloc, Germany stands to lose heavily from any such serial write-offs. Chancellor Merkel has put the credibility of her government on the line with the German electorate, promising that the resolution of the crisis will not impinge on their nation’s economy. But taking a $100 billion haircut, if Germany is forced to do so, is going to make a lot of Germans angry as hell.
However, if Germany refuses to yield to debt restructuring then Greece will in all likelihood be forced into an exit from the monetary system. That will in turn lead to Greece having to seek financial help from other international creditors to shore up its crippled economy. Cut off from the European Central Bank and the IMF, Greece will have to turn to Russia, China and other BRICS nations to save itself from disintegration. That is the very thing that Washington is loathe to contemplate, and that is why the Obama administration is pushing Berlin to relent on its hardline debt stance towards Athens.
If Greece were to exit the eurozone, there will be recriminations across the EU, from countries such as France, Italy and Spain, which have also been urging Berlin to take a more accommodating line on Athens. Even Britain has been cajoling Berlin to make a deal with Greece, no doubt for the same unspoken ulterior geopolitical reasons as Washington.
The contradiction in Europe over the financial crisis is thus putting Washington on a head-on confrontation with Berlin. Washington needs Berlin to take a severe creditor hit in order to keep the EU coherent for its geopolitical objective of isolating Russia. But Berlin’s subservience to Washington is going to be severely strained if it is eventually forced to take such a hit to its economy. Berlin has talked itself into a political corner with its hardline creditor rhetoric towards Athens. How will Merkel explain a capitulation to her people?
One thing is sure, however. The American NSA phone-tappers at the German Chancellery are working overtime these days.