The United States Tries to Stitch Together a Broken Europe

Greece Uprising 2011 against austerity. image from wikipedia

The United States warned on Friday May 29, 2015 of a possible accident for the worlgreconomy if Greece and its creditors miss their June 2015 deadlines to avert a debt default.  Germany said there was no sign of a breakthrough…, [T]he debt stand-off between Greece and its European Union partners overshadowed a meeting of policymakers from the Group of Seven rich nations otherwise held to focus on ways to get the global economy growing strongly again.

U.S. Treasury Secretary Jack Lew repeated warnings not to minimize the global stability risk of Greece sliding out of the euro zone, even if most of its debt is no longer held by commercial banks.  “There is great uncertainty in there at a time when the world needs greater stability and certainty,” Lew told reporters after the G7 meetings.

Greece, which has been stuck in a deep debt crisis for the past five years, is due to pay back 300 million euros ($329.61 million) to the International Monetary Fund next Friday, although the IMF has said that deadline could be pushed back until later in June.  On June 30, Greece’s bailout expires, meaning it would be unable to call on cash currently available to it.  Lew said time was precious. “If you look from January until now, too much time has been spent unproductively,” he said.

He called for agreement quickly on the broad terms of a deal to avoid the risk of stumbling on difficult details at the last moment: “I think waiting until the day or two before whatever the deadline is, is just a way of courting an accident.”  Greek officials earlier this week said they were close to an outline agreement. That claim was quickly quashed by top officials from euro zone countries and the IMF.  German Finance Minister Wolfgang Schaueble said there was no indication of a breakthrough. “The positive news from Athens is not fully reflected in the talks,” he said.  France struck a more optimistic note, however, saying officials were not considering the possibility of Greece leaving the euro zone.  “There is no Grexit scenario,” Finance Minister Michel Sapin told reporters.

Trying to show that Greece had not dominated their meetings, G7 officials said they had discussed ways to finally put behind them the financial crisis of 2007-09.  Canada and Germany renewed their calls for countries to focus on bringing down their budget deficits as the best way to get their economies growing again.  But in a reminder of the long-standing divisions among policymakers over the merits of austerity or public spending, the United States said major economies should consider using fiscal policies to support growth and avoid deflation.

Excerpts from DAVID LJUNGGREN AND PAUL CARREL, U.S. warns G7 of global economy ‘accident’ without Greece deal, Reuters, May 29, 2015

See also Deep Deformation of Europe

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