The Greek government must make tough fiscal decisions and quickly reach an agreement with international creditors and fellow members of the euro zone, or it risks devastating both the country’s economy and people, U.S. Treasury Secretary Jack Lew said in an interview released on Saturday.
The change in tone from the Obama Administration comes amid Greek prime minister Alexis Tsipras return from a Moscow meeting with Russian president Vladimir Putin, where the two signed a pipeline deal that the United States publicly opposes.
“I think we’re at a moment now where the burden is on Greece to come back with a response that’s the basis for reaching an agreement as quickly as possible,” he said in an episode of CNN’s “Fareed Zakaria GPS” program that will air on Sunday, according to a transcript.
“What we know is the best solution is for Greece to make some tough decisions and for this to be worked out,” he said.
Once critical of additional austerity, U.S. president Barack Obama had gone on record in solidarity with the Greek government’s feud with Europe.
Back on February 1st, he told Fareed Zakaria “You cannot keep on squeezing countries that are in the midst of depression. At some point there has to be a growth strategy in order for them to pay off their debts to eliminate some of their deficits.”
Greece needs to secure a cash-for-reforms deal in order to avoid defaulting on a 1.6 billion euro International Monetary Fund loan at the end of June, but talks have stalled and the long-struggling country faces being drummed out of the euro zone if it fails.
Since the February statement by Obama, a lot has changed— including the tone of the U.S. government’s involvement in Greece. Much of this might be geopolitics and a bit of anger coming out of Washington for decisions and actions by the Tsipras government.
In addition to the pipeline deal signed with Russia, the Greek parliament considered a controversial law that would release to house arrest known terrorists, including Savas Xiros, who was a member of the November 17th terrorist organization that was responsible for several American deaths. The law was vehemently protested by US Ambassador David Pearce and the U.S. State Department.
The United States is now turning up the heat on the Greek government to break the deadlock. Last Tuesday Lew called Greek Prime Minister Alexis Tsipras to emphasize “the urgency of Greece making a serious move to reach a pragmatic compromise with its creditors,” and on Wednesday the State Department sent the same message.
“The risk of contagion obviously is different than it was in the past because Greek sovereign debt is no longer sitting on the balance sheets of financial institutions. It’s mostly sitting in sovereign places,” Lew told Zakaria.
But he cautioned that markets’ reaction to a default, or to the country’s withdrawal from the euro zone, cannot be foreseen, adding “I don’t think anyone should want to find out.”
“It’s clear that within Greece, the consequence of a failure here would mean a terrible, terrible decline in their economic performance,” he said. “It will hurt the Greek people. They will bear the first brunt of a failure here.”
