With Radical Left SYRIZA leader Alexis Tsipras ruling – US President Barack Obama – who backed austerity when New Democracy leader Antonis Samaras was in power – now says it doesn’t.
That came as Greek Finance Minister Yanis Varoufakis was touring key European Union cities in support of SYRIZA’s drive to ease austerity and get better terms for international loans.
Obama has suggested that Greece will not be able to recover from its economic crisis unless there is a let up in austerity policies.
“You cannot keep on squeezing countries that are in the midst of depression,” when CNN’s Fareed Zakaria asked him about the case of Greece. “At some point, there has to be a growth strategy in order to pay off their debts and eliminate some of their deficits.
“There is no doubt that the economy of Greece was in dire need of reform,” he said in the interview broadcast on Feb. 1. “Tax collection was famously terrible. In order for Greece to compete in the world markets, they had to initiate a series of changes.”
But, joining a chorus of other critics, Obama said it’s unlikely Greece can fully recover or pay the 240 billion euros ($272 billion) it owes if the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) keeps choking it with austerity.
Big pay cuts, tax hikes, slashed pensions and worker firings created record unemployment and deep poverty since being instituted almost five years ago and the country was just beginning a tenuous recovery when SYRIZA took power and said it would reverse austerity.
Obama said it is very difficult to carry out reforms when a country’s economy has contracted dramatically. Greece saw almost a quarter of its Gross Domestic Product (GDP) disappear between 2008 and 2014.
“It’s very hard to initiate those changes if people’s standards of living are dropping by 25 percent,” he said. “Over time, the political system and society cannot sustain it.” He had supported those measure before, however.
Obama also suggested both sides would need to compromise and that SYRIZA couldn’t stick to its campaign promises of unilateral action or defaulting on a big chunk of debt, while the Troika has refused debt relief.
“My hope is that Greece will remain in the eurozone,” he told CNN. “I think that will require compromise on all sides. When the financial crisis in Greece flared up a few years ago, we were very active in trying to arrive at some sort of accommodation. I think there’s recognition on the part of Germany and others that it would be better for Greece to stay in the Eurozone than be outside of it and the markets will obviously be skittish about this.”
Germany is the biggest contributor to the loans but Chancellor Angela Merkel has infuriated Greeks with her insistence on unending austerity so far.
Obama suggested that the Eurozone needed to do more to stimulate growth and repeated that countries that have been through deep recessions, such as Greece, should be assisted.
“More broadly I’m concerned about growth in Europe. Fiscal prudence is important, structural reforms are necessary in many of these countries but what we’ve learnt in the US experience… is that the best way to reduce deficits and restore fiscal soundness is to grow,” he said.
“When you have an economy that is in freefall there has to be a growth strategy and not simply an effort to squeeze more and more out of a population that is hurting worse and worse.”