Sunday, February 28, 2010

Will the Greek Debt Crisis Visit America?

The Prime Minister of Greece, George Papandreou, will visit President Obama on March 9, 2010. This follows a meeting between Papandreou and German Chancellor Angela Merkel on March 5, 2010. The earlier meeting is acknowledged to be about Greece's sovereign debt crisis, and the discussion will no doubt concern Greece's progress toward fiscal prudence and the conditions for a German-sponsored bailout. Although the German public is largely opposed to a bailout, the German government may have little choice but to offer some assistance at some point fairly soon. Germany, Greece and the rest of the EU share a common currency and a common market. They're more intertwined than the world's money center banks. Germany profited from Greece's profligacy, which expanded Germany's export markets. Germany will surely have to bear some of the burdens of that profligacy, although we can expect the German government to strike a hard bargain in terms of requiring Greek austerity.

President Obama's willingness to meet with Papandreou is somewhat perplexing. The White House announced that the two would discuss a "broad range of strategic issues." Okay. Like overfishing of tuna in the Mediterranean? Or the effect of air pollution on the physical condition of the Parthenon? Or improved anti-terrorist security measures at the Athens airport? Or a joint condemnation of Iranian and North Korean nuclear ambitions? Or is it possible they might discuss Greece's sovereign debt crisis?

President Obama needs to watch where he's walking, because there's a political bear trap on the trail in front of him. A lot of people outside the Tea Parties wouldn't begin to brook the idea of American assistance to help Greece deal with its sovereign debt crisis. (We don't need to discuss how Tea Partiers would feel about this issue.) Yet, what on earth would Obama and Papandreou talk about at a time like this other than Greece's sovereign debt crisis?

President Obama has an increasing number of political adversaries, and he doesn't need to be his own worst adversary. He's more popular overseas than in the U.S., but he shouldn't heed the siren call (okay, that double entrendre was intended) of his foreign fans. With the resurgence of populism, paranoia about the Trilateral Commission, the Council on Foreign Relations, the Bank for International Settlements, and, of course, the United Nations, is ballooning. A meeting with Papandreou announced with a vague description of an agenda will only inflame the already uncontrolled imaginations of the fearful.

The United States has no business assisting the Euro bloc nations having sovereign debt problems. Government bailouts shift the bailee's losses onto taxpayers. Whatever the plus and minuses of the federal government's bailouts of Wall Street, we cannot take on the burdens of other nations' irresponsibility. Assistance to Greece would raise a firestorm of anger among the American electorate that would snuff out any chances the Obama administration has for health insurance reform and perhaps many other of its key policy initiatives that would benefit the American people.

No doubt, the leaders of Spain, Portugal, Ireland, Iceland and other nations with sovereign debt problems must be maneuvering for their meetings with President Obama. He needs to keep his schedule filled up with appearances at elementary schools and visits by Girl Scouts to the White House. Many of the now prosperous economies of East Asia, which may be the economic engines that pull the rest of the world out of the current recession, went through hell after their own 1997-98 debt and currency crises. The IMF took them to the woodshed and did something with a stiff birch switch. The outcome was much more fiscal discipline and financial prudence, and comparative prosperity today. China, which didn't take IMF money, has always assumed that it would have to get by on its own, and acted accordingly. Its self-sufficiency has paid enormous dividends. People don't prosper when they go on the dole. Neither do countries.

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