When America gets snippy about Europe

June 8, 2015

One of the sideshows of the Greek crisis has been the noise on the subject from the United States, which in short just wants Europe to get on with it and make a deal. There was more of this over the weekend at the Group of Seven meeting in Germany, although not quite so blunt as some recent forays. Barack Obama was keen to join Germany in hoping for a speedy solution. But the White House did again remind those who may not be aware that global financial markets may get unhappy if there is no agreement.

U.S. interference in European matters tends to irritate many EU leaders and frankly can put their backs up. You only have to look back a decade or so at Washington’s public advocacy of EU membership for its NATO ally Turkey. Some of the response then was along the lines of “Yes, and you make Mexico the 51st state”.

So U.S. concerns may not have much impetus. But it is worth remembering that the United States only says this kind of thing when it is in its own interest. There is clearly a fear in Washington that international markets will suffer badly from a Greek default and even that Grexit could be a longer-term body blow to the permanency of the euro. Neither of these threats tops the worry list in the EUindset, where the running assumption is that all is suitably ring-fenced.

Back at the coal face, Greek Prime Minister Alexis Tsipras has rejected as “absurd” the latest offer from the EU/IMF and irritated a lot of his remaining friends, such as European Commission President Jean-Claude Juncker, while he is at it.
Tsipras’ reaction is, perhaps, not surprising, given the EU offer included a demand to cut payments to the poorest pensioners. At the very least, it suggests that the creditors have not grasped the depth of despair and anger among Greeks, which led to Tsipras’s election in the first place. Betting here is that the line on pensions will not make it into any pact.

That said, Greece has always had a habit of saying one thing in international meetings, then backtracking back home. And the EU/IMF also hold a strong hand. At the end of June, Athens will have to pay 1.6 billion euros to the IMF, something it almost certainly won’t be able to do unless a deal is cut. June 14 is the latest deadline being bandied around – but EU deadlines tend to be less fatal than the word implies.

Turkey’s parliamentary elections produced more surprise than expected. Not only did President Tayip Erdogan fail to get the kind of super majority he wanted to create greater presidential powers, the AKP party did not get a majority at all.
Suddenly, increasingly authoritarian Turkey is facing the prospects of the instability of a minority government. Markets don’t like it, but some of those in European capitals who were worried about Erdogan’s less democratic tendencies will.
Whether this puts paid to Erdogan’s dream of amending the constitution to create a powerful presidential system remains to be seen.

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