INTERNATIONAL BUSINESS
U.S. Urges European Leaders to Solve Greek Crisis Quickly


By JACK EWINGMAY 27, 2015


AdvertisementContinue reading the main story
Continue reading the main storyShare This Page
Email
Share
Tweet
Save
More
Continue reading the main story

DRESDEN, Germany — The United States Treasury secretary urged European leaders on Wednesday to find a solution quickly to the crisis in Greece, stressing that the country’s deteriorating financial condition poses a threat to the global economy.

“Failure to agree on a path forward would create immediate hardship for Greece and broad uncertainties for Europe and the global economy,” the Treasury Department said in a statement summarizing Jacob J. Lew’s remarks, which he made in London before arriving here for a meeting of finance ministers and central bankers from the Group of 7 most industrialized nations.

Mr. Lew said there was a risk that events could get out of control and lead to an “accident.”

“Brinkmanship is a dangerous thing when it only takes one accident,” Mr. Lew said at the London School of Economics. “No one should have a false sense of confidence that they know what the result of a crisis in Greece would be.”
Continue reading the main story
RELATED COVERAGE


With Money Drying Up, Greece Is All but BankruptMAY 25, 2015

E.C.B. Said to Be Unlikely to Cut Greece LooseMAY 19, 2015


Greek Finance Minister Lashes Out at E.C.B. ChiefMAY 14, 2015

Mr. Lew also spoke by phone in the morning to Alexis Tsipras, the Greek prime minister, the Treasury Department said.Continue reading the main story
TIMELINE: GREEK DEBT CRISIS

December 2009 Credit ratings agencies downgrade Greece on fears that it could default on its debt.
May 2010 Europe and Greece reach a $146 billion rescue package, conditional on austerity measures. Some economists say the required cuts could kill the patient.
October 2011 Banks agree to take a 50 percent loss on the face value of their Greek debt.
July 2012 Stocks soar after the head of the E.C.B. says policy makers will do ''whatever it takes'' to save the euro zone.
January 2015 Greek voters choose an anti-austerity party. Alexis Tsiprasbecomes prime minister.
May 2015 Greece quells fears of an imminent default on its debts,authorizing a big loan payment to the I.M.F. It is not clear how much longer Greece can continue to scrape by.


Greece is not officially on the agenda at the G-7 meeting, which is focused on ways to improve global growth, on tax issues and on bank regulation. Mr. Lew’s comments signaled, however, that he is likely to use the meeting to press European leaders to show more willingness to compromise on the terms of further aid that Greece needs in order to continue paying its debts and avoid economic collapse.

Almost since the beginning of the eurozone crisis in 2010, high-ranking American officials have often urged wealthier European countries like Germany to be more generous to Greece and other stricken eurozone countries. But it will be difficult for Mr. Lew to budge the hardened positions of the countries involved.

Three eurozone countries — Germany, France and Italy — are G-7 members, along with Britain, Canada, Japan and the United States.

A spokesman for Wolfgang Schäuble, the German finance minister, declined to comment on Mr. Lew’s remarks. Germany, along with the International Monetary Fund and many other countries in the eurozone, continues to maintain that it is up to Greece to agree to changes in labor regulations, reductions in the number of government workers and other steps intended to save money and improve the performance of the economy. Only then, Germany and others say, will the eurozone leaders agree to more aid for Greece.

Among European officials, there is a widespread feeling that bending the rules to suit a left-wing government in Greece would set a dangerous precedent, and perhaps weaken the eurozone as much as a Greek exit would.

United States officials, though, have expressed concern about the wider consequences for the world economy and international politics. There is fear that if Greece defaults on its debts and drops out of the eurozone, it could be tempted to move closer to Russia. Gazprom, the Russian energy giant, has raised the possibility of routing a gas pipeline through Greece.


AdvertisementContinue reading the main story


AdvertisementContinue reading the main story


AdvertisementContinue reading the main story

There is also concern that problems in Europe could hurt the United States economy at a time when American growth appears to be slowing.

In Athens, Greek officials expressed optimism on Wednesday that they would soon reach an agreement with other eurozone countries, which have provided vital credit. As portrayed by Greek officials, only the details of an agreement remained to be completed.

But there was little sign that the optimism was shared in Brussels or elsewhere among the 19 countries in the eurozone.

The European Central Bank broke on Wednesday from the pattern of recent weeks and did not raise the maximum amount of emergency cash that Greek banks are allowed to borrow. But officials said the decision should not be taken as a signal that the European Central Bank is becoming concerned about its financial exposure to Greek banks, which is more than 110 billion euros, or about $120 billion. Until Wednesday, the central bank had raised the limit on emergency cash it provides in small weekly increments.

A person with knowledge of the discussions among members of the European Central Bank’s Governing Council said the limit was not raised simply because Greece’s central bank did not request an increase.

Officially, the G-7 meeting in Dresden will center on the global economy and how to prevent future financial crises. On Thursday, participants are to hear presentations from leading economists, several of whom are known for their provocative views.

The experts include Lawrence H. Summers, a professor at Harvard University and a former United States Treasury secretary. Mr. Summers has argued that the American economy is suffering from what he calls secular stagnation, caused by excess savings in relation to investment.

Two other Harvard economists are also set to speak: Kenneth Rogoff, known for his research on government debt; and Alberto Alesina, whose research is relevant to the debate about so-called austerity, the severe budget constraints placed on Greece and other countries with debt problems.

Mr. Alesina has argued in research papers that spending cuts by European governments are not necessarily bad for economic growth, but that tax increases can increase the severity of recessions.

Although the German government organized the G-7 meeting this year, only one German economist is on the program, Martin Hellwig, director of one of the Max Planck institutes in Bonn, Germany. Mr. Hellwig has argued for much stricter regulation of banks, including forcing them to rely much less on borrowed money than they do.

Other economists scheduled to speak Thursday in a closed session are Robert J. Shiller, a Nobel laureate and professor at Yale University; Nouriel Roubini, an economist based in New York known for correctly predicting the onset of the financial crisis; and Jaime Caruana, general manager of the Bank for International Settlements, a clearinghouse for central banks based in Basel, Switzerland.