22nd Oct 2020

US 'supportive' of Europe's measures on Greece

  • Washington is confident that Greece will manage to pull through (Photo: jay bergsen)

The US is supportive of the EU's recent decisions regarding Greece and does not believe that other troubled euro countries will line up for the financial rescue mechanism now in place, an American official told this website.

"The US clearly has a very strong interest in the success of the European Union and we were very supportive in the efforts by the EU to work out an agreement with Greece," Robert Hormats, undersecretary of state for economic affairs said in an interview with the EUobserver.

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EU leaders last week agreed to set up a financial rescue mechanism together with the International Monetary Fund which would help out Athens if necessary, while strongly watching over the Greeks' spending cuts and economic reforms.

Washington is very impressed with the reform pledges made by the Greek government, the US official said, while admitting that "obviously reforms are unpopular in some quarters." Athens has already seen a series of strikes and protests turning violent amid rising popular discontent over the governments' economic policies.

As other southern eurozone-countries, notably Portugal, are also facing troubles in capping their deficit and raising loans on the international markets, some commentators have argued that the bail-out mechanism lead to "moral hazard", with other capitals taking advantage of the mechanism.

But Mr Hormats said this theory has been "overblown" and that it was rather more likely that the Greek experience works as an "inspiration to other countries to take tough measures before getting into difficulties."

The agreed strengthened co-ordination of economic policies in the eurozone was also appreciated in Washington, Mr Hormats said.

He added that with the health care reform cleared out of the way, the US Congress would have now time to focus on financial reform, a process which needs to be co-ordinated on both sides of the Atlantic.

Mr Hormats admitted there are "differences" between Washington and European capitals, but insisted there was a "good dialogue" between the US treasury department and its counterparts in the EU.

Earlier this month, US treasury secretary Timothy Geithner sent a letter to the EU financial services commissioner, Michel Barnier, complaining that the bloc's draft hedge fund rules would disadvantage American firms.

Firefighting in Greece

During the weekend, EU economy commissioner Olli Rehn said it was "essential" that the right lessons are drawn from the Greek crisis.

"Certainly we need to strengthen economic governance in Europe, implying stronger economic policy coordination and surveillance of budgetary policies especially of the euro-area countries," he said at the Brussels Forum, a conference organised by the German Marshall Fund of the US, a Washington-based think tank.

The Finnish politician known for his intransigence with Balkan countries on his previous assignment as enlargement commissioner also warned that the economic stimulus packages of the past two years "wiped out 20 years of fiscal consolidation in EU."

"We need to do our utmost for a rigorous budgetary surveillance, including on draft national budgets and medium-term budgetary projections if we seriously want to avoid another crisis like we have faced with Greece," he said.

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