'America's role in this Greek tragedy'

from the guardian........

"Greece faces unacceptable conditions for a new bailout. If it defaults, the US had better be ready for the economic shock''


"The European authorities are playing a dangerous game of "chicken" with Greece right now. It is overdue for US members of Congress to exercise some oversight as to what our government's role is in this process, and how we might be preparing for a Greek debt default. Depending on how it happens, this default could have serious repercussions for the international financial system, the US economy and, indeed, the world economy.

The US government has a direct and significant role in the Greek crisis because the US treasury department has the predominant voice in the International Monetary Fund (IMF). The IMF, together with the European Commission and the European Central Bank (ECB) – the three are commonly referred to as "the Troika" – are negotiating a new austerity package with the Greek government, in return for a new bailout deal. This package promises more suffering for the Greek people – that is acknowledged by all sides. But the Troika thinks it can ram the programme through the Greek parliament on Tuesday, with the threat that the IMF will not disburse the next $17bn instalment of Greece's current loan package – thus putting Greece in a situation of sudden default.

A "voluntary" rollover by some of the bondholders, as currently proposed, will not resolve the problem. And there is only so much punishment that the Greek population (or the Spanish population, which has recently seen hundreds of thousands of protesters in the streets in the face of 21% unemployment) will take. The Greek government has already laid off 10% of its government workers, and the plan that they will vote on this Tuesday calls for layoffs of another 20%. It also provides for a total of 12% of GDP of fiscal tightening for 2011-2015 – a recipe for never-ending recession, for the purpose of trying to pay off an unpayable debt to bankers and bondholders.

A Greek debt default appears inevitable, and the potential for financial contagion is significant. What is the US government doing to avoid a financial crisis, and to prepare for the various contingencies that may be anticipated? One would think that, after living through the events that followed the collapse of Lehman Brothers in 2008, some responsible government officials in the United States would be asking these questions".............LINK