Sen. Bernie Sanders (I-Vt.) has written a letter asking Federal Reserve chair Janet Yellen to explain her inaction and the Fed’s silence on Greece’s stand against austerity. The stakes are too high for the U.S. to let Greece go it alone.
“Make it clear to the leadership of the European Central Bank that the United States and the Federal Reserve object to actions that affect our national interest and risk U.S. and global financial stability through the unnecessary and counterproductive implementation of deflationary policies,” Sanders asks Yellen in the letter.
In other words, take a side.
Last month, Greek voters shocked the world by electing the leftist Syriza party to power, and voting to end five years of punishing austerity policies that:
● shrunk Greece’s economy by 25 percent;
● increased Greece’s national debt to 175 percent;
● increased overall unemployment to 28 percent, and youth unemployment to 60 percent;
● reduced 3 million Greeks to living at or below the poverty line;
● increased suicides by 45 percent.
Austerity yielded similar results in other European countries.
● In Spain, austerity has force 570,000 from their homes, raised childhood poverty to 36 percent, increased unemployment to 23 percent, and increased debt 100 percent.
● Italy’s public debt rose from 116 percent to 133 percent of GDP in three years, and youth unemployment reached 44 percent.
● In Portugal, youth unemployment is at 35 percent, and economic output dropped 7.4 percent between 2009 and 2013.
Syriza is already fulfilling its promises. The government froze plans to privatize Greece’s major power utility, a condition of its €240 billion bailout. It also halted the sale of its largest port, Piraeus Port Authority, to China’s Cosco group. (The government holds majority stakes in both PPC and Piraeus Port Authority.)
Eurozone financial elites panicked. The European Central Bank announced that as of February 11, it would no longer accept Greek debt as collateral for loans. (Greece has until February 16 to apply for a bailout extension. The current bailout expires on February 28.) The ECB also hinted that it may withdraw emergency lending assistance, wreaking havoc with Greece’s banking system.
During a press conference with President Obama on Monday morning, German Chancellor Angela Merkel said, “What counts is what Greece will put on the table… I will wait for Greece to come with a sustainable proposal, and then we will talk about this.”
The Eurozone finance ministers will meet in Brussels on Wednesday, where Greek finance minister Yanis Varoufakis will announce Greece’s proposals to reform current austerity measures. But Merkel said the basis for discussions would be the programs agreed upon by the troika of Greece’s lenders. Germany, Greece’s creditors, and the ECB already prefer to see Greece further harm its people and its economy, than ease austerity policies.
Varoufakis has proposed a “bridging loan” that would carry the country through June, by reducing the cost of Greece’s loans, and allowing the government to run modest budget surpluses, ease Greek suffering, and implement pro-growth policies. The proposal is based in simple reality: Greece’s debt cannot be repaid. Five years of austerity have punished and humiliated Greeks while increasing the country’s debt.
Varoufakis’ proposal isn’t just for Greece. It’s for all of Europe. In an interview with Italian public television, Varoufakis said that Greece will propose a New Deal for Europe, as President Roosevelt did for the U.S. during the Depression:
“The entire Europe is covered in a cloud of fear. We are at risk of becoming worse than the former Soviet Union,” he said, adding that, “we, the Greeks, don’t have the monopoly on the truth. What we can do, for the rest of Europe and for Italy in particular, is to open a small door to the truth. We cannot find the truth on our own, but we can open a door and move so that you can join us. This way, we will be able to leave the darkness of present austerity and enter into the light of a European rational and sober discussion.”
This is where the Fed comes in, and why Yellen’s silence has drawn Sen. Sander’s attention. President Obama is one of the few world leaders to speak up about Greece’s plight: “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,” President Obama said during an interview with CNN’s Fareed Zakaria.
The Fed has leverage with its European counterpart, via dollar swap lines. Withdrawing or even threatening to withdraw those lines over the ECB’s treatment of Greece would demand attention. The U.S. has a direct interest in the outcome. The U.S. and Eurozone economies are interdependent. If Europe’s economy crashes, it could take ours down with it.
Greece has shown that populist progressive movements can fight and win. Syriza’s victory raises the question: Do elections matter? Europe’s economic elite have an answer for Greece: Your election doesn’t matter.
The past eight years have raised the same question for America. Since the Supreme Court’s Citizens United ruling, our economic elite have given us the same answer. That’s why the Fed, and the U.S., shouldn’t let Greece go it alone. The Greek election was an important election victory against austerity. Now, it has to matter.