Yet another American analyst is suggesting that Greece could be forced out of the Eurozone in the next few months and that it be a “ticking Greek time bomb” exploding President Barack Obama’s chances for re-election. In a column for the American Enterprise Institute (AEI), a neo-conservative think tank in Washington, D.C. that produced many of former President George W. Bush’s advisors, Desmond Lachman said that all the math is against Greece surviving and if the country collapses the fallout would affect Obama’s campaign negatively.
“The last thing that President Obama needs before the November election is a Greek exit from the euro. Such an event would surely cause contagion to the rest of southern Europe, which would in turn roil global financial markets. Yet the evidence coming out of Athens suggests that such a Greek event could very well occur over the next few months, with all of its adverse consequences for the U.S. and global economies,” Lachman wrote.
Conservative New Democracy Greek Prime Minister Antonis Samaras is struggling to convince his reluctant coalition partners, the PASOK Socialists of Evangelos Venizelos, and the tiny Democratic Left of Fotis Kouvelis, to reach agreement on how to cut $14.16 billion from the next two year’s budget as demanded by international lenders.
Greece is surviving on a first series of $152 billion in loans from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) and awaiting the last installment, some $38.8 billion next month. Also on hold is a pending $173 billion second package until the government makes the cuts and administers reforms, without which the money pipeline could be turned off.
“In the meantime, the Greek government is literally running out of money. Without any further disbursements from the IMF-EU program, Greece will almost certainly default on its official loan obligations by October,” he added. Compounding Samaras’ problem, German Chancellor Angela Merkel – whose country is putting up much of the money to save Greece – continues to insist on more austerity and Lachman wrote: “The Germans are doing so despite the already very depressed state of the Greek economy and the likelihood that further budget austerity will only exacerbate and prolong Greece’s economic depression.”
The pay cuts, tax hikes and slashed pensions that came with the bailouts have worsened a five-year recession, put 1.15 million people out of work, and could make the economy shrink as much as 11 percent over the next two years, a hole from which Greece could not escape, he said. But the immediate problem is that Greece could go belly-up before the November elections and put a big dent in Obama’s re-election, he added.
“There is every indication that Greece’s economy is now collapsing at an accelerating rate,” he said, and with Samaras reneging on campaign pledges to save the poor and elderly and planning big new pension cuts, Lachman said the Coalition of the Radical Left (SYRIZA) which finished a close second in the June elections and is led by a young firebrand, Alexis Tsipras, could mobilize the same kind of protests and strikes that brought down the former government of then PASOK leader George Papandreou last year. “It is possible that President Obama could be lucky and have the Greek situation hold together until after the election,” Lachman added. But, he said, “The rapidly deteriorating political and economic developments in Greece suggest that the odds against that occurring are fast increasing.