Greece sticks to bailout vote, as U.S., Europe weigh options
ATHENS -- Greece's prime minister on Wednesday won backing for a surprise national vote on a European-funded bailout but many say opposition to benefits cuts and foreign oversight may sink the package and prevent Europe from resolving its financial crisis.
"We will not implement any program by force, but only with the consent of the Greek people," Greek Prime Minister George Papandreou said after his Cabinet approved the public referendum. "This is our democratic tradition, and we demand that it is also respected abroad."
Papandreou said he supported the bailout before boarding a flight to France for a meeting of the G-20, an organization representing the world's major economies. Economists say the larger question for world leaders is whether Europe and America, not just Greece, is pursuing the right course.
"Austerity measures have taken the top priority — no one is really considering how to stimulate growth," Carsten Brzeski, chief economist with ING financial group in Brussels, said of the European approach to overspending.
"In the U.S., there is the same necessity but people and policymakers still think you can solve the problem through faster growth and stimulus," he said.
The attitude is, "Let's do the cleaning up later and let's hope that simply by stimulating again our house we can build a bigger house and just leave the dirty stuff downstairs and no one will notice anymore."
When the financial crisis hit in 2008, German Chancellor Angela Merkel advocated the wisdom of the "Swabian housewife," a stereotype of the frugal and prosperous southern German work ethic. The example of living within one's means has become a guiding principle for European economic policy, especially as Germany is responsible for the lion's share of the bailout money going to Greece and other debt-ridden European nations such as Italy, Ireland, Spain and Portugal.
On the other hand, President Obama has advocated borrowing to fund significant amounts of government spending in an attempt to create jobs, and his administration hasn't been shy about lecturing European counterparts on the need to spend money to boost economic growth.
"The Europeans and especially the Germans feel pushed by the Americans," Brzeski said. "But they feel that those living in glass houses shouldn't be throwing stones."
That glass house is a U.S. debt level of close to 95% of GDP, outstripping that of the eurozone taken as whole at just over 85%. In Warsaw last month, Treasury Secretary Timothy Geithner urged European leaders to solve the eurozone crisis quickly before it precipitated a global recession. Many Europeans bridled at his presence, unusual at a European summit.
Ulrike Guérot, who specializes in European affairs at the European Council on Foreign Relations in Berlin, said Europe does not teach America what to do and did not welcome advice from a country that is trying to spend its way out of a recession.
"First you need to get your own house in order," Guérot said.
The last thing that Europe should be doing, say many analysts, is replicating the American approach.
"This kind of approach is what Greece used to do the past 15 years and now we are getting the bill for it," said Matthias Kullas, an economist at the Center for European Policy in Freiburg, Germany. "Instead of making the structural reforms … all the time they were trying to give impulses via debt.
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