Greek Debt Woes Continues: U.S. Financial Support of Greece's Sovereign Debt Bailout Through IMF

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While hosting German Chancellor Angela Merkel in June, U.S. President Barack Obama reaffirmed his support of a financial bailout of Greece whose sovereign debt tallies US$484 billion (€340 billion). The International Monetary Fund's (IMF) loan approval earlier in the year totaled U.S.$55 billion and included, in part, U.S. financial support. Though currently at a stand-still, the proposed joint IMF and European Union (EU) bailout package for Greece totals US$145 billion.

Some eurozone nations are hesitant to commit to what has been coined "Greece Bailout II", responding to the vocal concerns of its more (or less) fiscally sound national citizens. John Lipsky, the IMF's acting managing director, seems to be fighting for E.U. bailout support like his political-life depends on it. The U.K.'s Guardian newspaper reports that Lipsky threatened to trigger sovereign default if Germany failed to support the second-round of Greece's bailout financing. Lipsky's recent remarks in Luxembourg urged the Europeans “to bring the debate about debt restructuring and the set-up of the ESM (European Stability Mechanism) quickly to a close.”

In its customary reserved posture towards the E.U.'s financial interdependence, U.K.'s Prime minister David Cameron has assured U.K. taxpayers that participation in Greece's bailout will be limited to its IMF pledge. No ESM for the U.K., please. 

The debate about financing Greece's bailout makes sense among the European nations. The union is an economic one. For the U.S., however, support of a bailout of Greece's sovereign debt, even through the IMF, makes less sense.

The U.S. federal government has reached its national debt ceiling. Many U.S. states struggle with budget shortfalls. U.S. national unemployment sits conservatively at 9.1 percent and the likelihood of a government-sponsored jobs and workforce development program seems unlikely. Instead, the debate among U.S. federal and state government officials surrounds a series of drastic cuts to core national public services, the so-called "entitlements".

U.S. financial support of Greece's bailout sounds eerily like a global version of the "too big to fail" economic argument heard in an all-too-recent national scenario. While sympathetic to the Greek's financial misery -- there is certainly more than enough of this type of misery going around these days -- U.S. financial support of a bailout of Greece's sovereign debt amounts to globalization at its most absurd.

Further references:

• "Greece Program, IMF Approves 30 Bln Loan for Greece on Fast Track"; International Monetary Fund Survey Magazine; May 9, 2010
• "Obama Encourages Europe, Pledge U.S. Aid for Greece Crisis"; HuffPost Business; June 8, 2011 
• "Hardline IMF Forced Germany to Guarantee Greek Bailout"; Ian Traynor; Guardian; June 17, 2011

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