Tue, Feb 03, 2015 - Page 7 News List

Obama backs easing of Greek austerity program

PAIN WITHOUT GAIN:Obama said in an interview that austerity was limiting growth and ‘compromise would be needed on all sides’ for Greece to remain in the eurozone

AFP, WASHINGTON

Greece cannot not deliver a strong economic recovery unless authorities loosen austerity programs, US President Barack

Obama suggested in remarks broadcast on Sunday.

“You cannot keep on squeezing countries that are in the midst of depression,” Obama told CNN’s Fareed Zakaria GPS when asked about the situation in crisis-hit Greece. 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.”

Obama said the Greek economy was in “dire need” of reform but warned that drastic changes were tough to implement in a struggling economy.

“It’s very hard to initiate those changes if peoples’ standards of living are dropping by 25 percent. Over time, eventually, the political system — the society — can’t sustain it,” he said.

The Greek economy has shrunk by a quarter since 2008. Greek Minister of Finance Yanis Varoufakis said he wanted to reach a new agreement with international creditors on his country’s debt burden by the end of May.

Europe, particularly Germany, is watching Greece’s new far-left government closely after the anti-austerity SYRZIA party swept to victory last month promising to try and write down half of Greece’s debt.

Obama said he hoped Greece remains in the eurozone, but cautioned that it would take “compromise all sides,” and that markets could react nervously.

“There’s a recognition on the part of Germany and others that it would be better for Greece to stay in the eurozone than be outside of it, and the markets obviously are going to be skittish about this,” he said, adding that Europe’s growth rate was a concern.

“Fiscal prudence is important, structural reforms are necessary in many of these countries, but what we have learned in the US experience... is that the best way to reduce deficits and to restore fiscal soundness is to grow,” Obama said. “When you have an economy that is in a free fall, there has to be a growth strategy and not simply the effort to squeeze more and more out of the population that is hurting worse and worse.”

Greek Prime Minister Alexis Tsipras has promised to reverse many of the unpopular measures that underpin Greece’s US$270 billion bailout program. Tsipras’ “national salvation” government said it would freeze plans to sell a majority stake in two of the nation’s ports, and also halt the privatization of the top electricity and petroleum companies.

Obama telephoned Tsipras after his victory to congratulate him on an election result which puts Greece on a potential collision course with Washington.

“The president noted that the United States, as a longstanding friend and ally, looks forward to working closely with the new Greek government to help Greece return to a path of long-term prosperity,” a White House statement said.

Obama has pledged to end what the White House has dubbed the “manufactured crises and mindless austerity” in the US prompted by automated budget cuts. Obama was set to unveil a new budget yesterday, which includes plans to increase government spending, in defiance of his Republican opponents in US Congress.

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