Friday, June 19, 2015

Russia Could Come to Greece’s Rescue. That’s Bad News for the United States and NATO

Russia's President Vladimir Putin is a hero to the Russian people for standing up to the West. He might be gaining a whole new Hellenic fan base, and that's bad news for the United States and Europe.

Greek Prime Minister Alexis Tsipras left a Thursday meeting with Europe's finance ministers in Luxembourg no closer to paying the International Monetary Fund the $ 1.8 billion his government owes than when he arrived. As the prospect for a payment deal by the July 1 deadline grows bleak, experts predict Tsipras will turn to Moscow for help.

Tsipras was set to meet with Putin on Friday at the St. Petersburg Economic Forum. Ahead of the meeting, Greece energy ministry officials said they would sign a pipeline deal with Gazprom, Russia's national energy company, a sign of Moscow's growing influence there.

At a previous meeting with Putin in April, Tsipras undermined NATO's position when he said European and American sanctions on Russia for its actions in Ukraine would lead to a new cold war in Europe. At the same gathering, Russia said it would pay for infrastructure projects in the cash-strapped Mediterranean nation.

So far, Russia has largely stayed out of the European financial crisis. But the Greek conundrum provides a tasty incentive to dive in.

If Moscow does, it would transform a five-year economic crisis into a geopolitical one.
"You do not want Europe to have to deal with Greece, who is a member of NATO, all of the sudden cozying up to Russia," Sebastian Mallaby, a senior fellow for international economics at the Council on Foreign Relations said Thursday.

Ahead of the Friday meeting, Russian Deputy Prime Minister Arkady Dvorkovich said he "can not comment on specific decisions" when asked if Moscow would rescue Athens.

This puts German Chancellor Angela Merkel into a difficult spot. Her own conservative party, the German people, and bankers in Frankfurt have all made clear they do not want to continue to pay for Greece if Athens does not heed calls to reform. But she's under pressure from Washington to maintain an alliance that will not upset the apple cart when it comes to sanctions.

"She does not love the idea that Putin would be presented with a gift if Greece is alienated from Western Europe," Mallaby said.

In an effort to move Germans to his side of the ledger, Tsipras published an op-ed Thursday in the Der Tagesspiegel newspaper in Berlin. In it, he rejected the "myth" that hardworking Germans were paying stipends for Greek retirees.

"Anyone who claims that German taxpayers are coming up for the wages and pensions for Greeks is lying," he wrote.

He then made the odd argument that older, retired Greeks need their pension in order to support their children. Right now, one out of four Greeks isunemployed.

Meanwhile, it appears as if Greece and its European partners are entering an endgame that could isolate Athens from the European monetary club. Greece insists that it has the money to pay back the IMF and the European Central Bank, but would only do so if Europe drops its demands for pension reform.

Speaking after the Luxembourg meeting, IMF chief Christine Lagarde made clear there would be no extension of the deadline for Greece to pony up the cash it owes.

"It will be in default, it will be in arrears vis-a-vis the IMF on July 1, but I hope it is not the case, I really do," Lagarde said. "There is no grace period or two-month delay, as I have seen here and there."

Now, European leaders have called an emergency meeting for Monday, in yet another attempt to get Greece to agree to pay. For her part, Merkel left a path for a deal open, saying Thursday in Berlin that she was "still convinced" a deal is possible.

But CFR's Mallaby thinks that outcome is unlikely. He said giving Greece any wiggle room would sent a bad signal to other European nations, like Spain and Portugal, struggling under the weight of years of unserviced debt.

"The personal relationship between Tsipras and his counterparts has just turned poisonous," Mallaby said. "He's misplayed this game quite badly."

"If Greece had a very functional government, we would not be in this position in the first place."

Photo credit: Louisa Gouliamaki / Getty Images

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