WASHINGTON, DC – The Ranking Member Budget Committee of the United States Senate, Bernie Sanders, is strongly urging the United States to use its influence with the European Central Bank to stop the severe austerity measures that are crushing the people of Greece.
Sanders said the U.S. government should “help insure that newly-elected leaders in Greece have the support they need to end austerity programs that have caused widespread suffering to its citizens.”
In a February 8 letter to the Chair of the Board of Governors of the Federal Reserve System, Janet Yellen, Senator Sanders said:
“The United States cannot stand idly by while the European Central Bank undermines the new democratically elected government of Greece, induces deflation and risks financial instability. President Barack Obama was right when he recently noted, with regard to Greece: “You cannot keep on squeezing countries that are in the midst of a depression. 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”
“Therefore, I am writing to ask you to make it clear to the leadership of the European Central Bank that the United States and the Federal Reserve object to actions that affect our national interest and risk U.S. and global financial stability through the unnecessary and counterproductive implementation of deflationary policies.”
Sanders stressed the United States’ leverage with the ECB, highlighting the $8 trillion that the Federal Reserve extended to the ECB during the financial crisis, as well as the current standing credit arrangement with the ECB on which the ECB can draw at any time. Therefore, Sanders said:
“These swap lines, as they stand, tend to make the United States implicitly supportive of the policies that have so destabilized and damaged Greece. But they also give us a reason, indeed an obligation, to object when a partner Central Bank departs from its commitment to financial stability.”
Sanders noted that:
“Several weeks ago the Greek people voted for a new government. This government canceled the privatization of key public assets, raised the minimum wage, and restored electricity to the needy. This government is seeking to restructure its relationship with the European Union to encourage economic growth in Greece and to escape from a deflationary cycle…It would be a terrible mistake for the world to forget what happens when a democratically-elected government, as was the case in Germany in the 1920s, is unable to relieve the severe economic suffering of its people.”
Sanders added that:
“As you know, the Greek people are suffering from a severe economic depression. Due to deflationary-inducing austerity policies, the Greek economy is 25% smaller than it was just a few years ago. Unemployment, youth unemployment, homelessness, HIV, suicides, and even cases of malaria have increased. While the humanitarian cost is severe, budget cuts have failed to address Greece’s debt problems. The country’s debt to GDP ratio is higher than it was when austerity measures were first implemented. This situation threatens to create a Eurozone-wide deflationary spiral, it elevates the risk of financial contagion, and it undermines vital U.S. interests.”
Last month, Sanders wrote a letter to the International Monetary Fund’s Managing Director Christine Lagarde raising similar concerns.
Yesterday, Sanders went on CNBC to spread this message.
“In the world that we live in, there has got to be flexibility. We have got to learn what happened in Germany after WWI. We have to learn what we did to try to prevent a worldwide depression just seven years ago. I think, imposing continued austerity on a government, on a people, who in a democratic election rejected that concept, is a dangerous thing to do economically and politically.”
“The Fed intervened during the great financial crisis of 2008 by providing trillions of dollars in short-term loans. The Fed could have also said, “Hey, guys. You’re on your own. We don’t know why your economies are collapsing and your financial institutions. It didn’t. And I would suggest that’s a lesson we could learn for Greece.”
REACTIONS TO SANDERS’ CHARGE
CREDO Action, a social change network of 3.5 million activists that sends millions of petition signatures and tens of thousands of phone calls to decision-makers each year, put out a statement titled, “Senator Sanders is on the money: Austerity is the wrong approach for Greece.” It read, in part:
“Senator Sanders is on the money. The U.S. Federal Reserve Bank shouldn’t help the European Central Bank throw Greece further into an economic crisis by contributing to devastating austerity measures,” said Becky Bond, CREDO’s Political Director, adding, “we join Senator Sanders in calling for Federal Reserve Chairwoman Janet Yellen to use her influence with the ECB to argue forcefully for an end to austerity in Greece,” concluding, “the democratically elected government of Greece must be allowed to raise the minimum wage and maintain a social safety net. If the Fed joins the ECB in tightening the screws of austerity, it could even fuel the rise of fascist elements as the country spirals deeper into depression.”