A parting gift to Athens from Obama
US President Barack Obama will raise Greece’s debt issue when he visits Europe in the context of his farewell tour in mid-November, as Vice President Joe Biden has suggested. Obama’s stops will include Athens and Berlin, and there are no more fitting capitals in which to discuss the matter of making Greek debt sustainable. Then again, perhaps it will not go down so well in Berlin.
“I promise he will raise any relevant issue,” Biden told the attendees of the Oxi Day Foundation gala last Thursday evening in Washington DC, when the subject of debt relief for Greece was raised in respect to Obama’s scheduled visit to the Greek capital on November 15.
Biden’s comments stirred some optimism in Greece just a day after a White House spokesman had insisted that the US president was not going to travel in order “to negotiate a new financial arrangement between Greece and the European Union” – a comment that suggested expectations should be contained.
Perhaps the desperate search for substance in brief comments couched in diplomatic-speak is a sign of Greece’s desperation rather than any specific intent from those speaking. What is certain is that there has been a tendency to overestimate the impact that Obama or any other US official can have on the decision-making process in the eurozone.
In fact, the key players in the euro area consistently kept the US at arm’s length when it came to dealing with the crisis, particularly in Greece.
We should not forget that in February 2010, about three months before Greece’s first bailout was signed, the US Treasury secretary at the time, Timothy Geithner, had warned eurozone state leaders and ministers during a G7 meeting in Canada that they could not make moral hazard the driving force of their crisis strategy.
“You can put your foot on the neck of those guys [the Greeks] if that’s what you want to do… but you have to make sure you counteract that with a bit more credible reassurance that you’re going to not allow the crisis to spread beyond Greece,” he said, according to the raw transcripts of his memoirs, which were published under the title “Stress Test.”
“They just wanted to take a bat to them,” added Geithner. “But in taking a bat to them, they were feeding a fare that was in its early stages.”
The eurozone was not particularly interested in Washington’s message at the time, and has been similarly unimpressed by the US government’s interventions since. Washington’s position is weakened in European eyes because it does not have “skin in the game,” in other words it does not stand to lose financially or politically from any Greek debt relief, especially as the money owed to the International Monetary Fund, of which the US is the largest member with a 17.5 percent quota, has “super-senior status” and cannot be restructured.
To see a more recent example of US proposals for a change in approach on Greece not having an impact in the eurozone, we only need to wind back to the end of January 2015 and Obama’s comment in the wake of the SYRIZA-led government’s first election win.
“You cannot keep on squeezing countries that are in the midst of a depression,” he told CNN. “At some point, there has to be a growth strategy in order to pay off their debts and eliminate some of their deficits,” he added, pointing out that it is difficult to carry out structural reforms when people are seeing their living standards plummet.
“Over time, the political system and society cannot sustain it,” he concluded.
SYRIZA’s madcap efforts aside, there was little sympathy for Obama’s astute observations on the Greek dilemma.
The US president will probably struggle to make any headway on the issue this time as well. German Chancellor Angela Merkel will likely not be in the mood to make any concessions beyond the rather vague pledges of the Eurogroup meeting of eurozone finance ministers in May, and certainly not before the current review – which only began last week – is concluded.
Crucially, with federal elections coming up next year, Merkel will be nothing but her usual, restrained self.
Taking this into account, perhaps the most significant economic impact that Obama could have is in encouraging Americans to visit Greece and spend larger sums of money.
Whereas Greece’s debt issue is likely to run and run, the economic revival cannot be delayed any longer.
Worryingly, though, the Greek economy’s main engine – tourism – is not firing on all cylinders.
Although the number of arrivals this year has been encouraging, their spending has been a disappointment. According to the travel receipt figures published by the Bank of Greece earlier this month, the tourism takings in August 2016 – at the height of the country’s peak season – were down 9.2 percent on last year. This was due to an 11.6 percent fall in average spending, which dropped to 596 euros.
The figures for visitors from the US were particularly poor. During the first eight months of the year there was just a 5.3 percent rise in the number of arrivals (much lower than arrivals from such leading markets as Russia and Germany, who reached the double digits). More significantly, travel receipts from US visitors plummeted by a considerable 24 percent during the same period.
Several theories have been put forward in order to explain this downturn, including retail receipts not being issued and non-registered accommodation (such as rentals through house sharing websites such as Airbnb) becoming much more popular.
While both theories might provide legitimate explanations, a 24 percent drop in spending from American tourists is a cause for alarm in the tourism industry of Greece, especially given that the receipts from US visitors had skyrocketed by a remarkable 46.4 percent during the January-August period last year.
The decline in travel receipts this year up to the end of August has been worth about 150 million euros, which is a significant hit for the Greek economy. It is also damaging for public coffers, which is a real setback when you doubt that even the most powerful man in the world can make any headway in convincing others to reduce your debt.