US Senator Bernie Sanders wants the Fed to use its leverage with the ECB to help Greece’s new government restructure its debt
When Syriza won the Greek national election last month, US Senator Bernie Sanders saw it as a victory for working people around the world. Now he is showing his support for Greece’s new government by calling ECB policy, and its strong relationship with the Federal Reserve, into question.
“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 US and global financial stability through the unnecessary and counterproductive implementation of deflationary policies,” Sanders wrote in a letter to Federal Reserve chair Janet Yellen.
Sanders compares Greece to pre-WWII Germany
Since the ECB just announced an even larger QE program than had been expected, accusing them of implementing deflationary policies is a bit strange, but of course he’s referring to the ECB’s decision to stop accepting junk-rated Greek sovereign bonds as collateral.
Sanders says that continued austerity would be irresponsible since the harsh measures have already pushed unemployment, homelessness, and suicides to extremely high rates without actually helping Greece recover from recession (if not depression) that it’s suffered through since the financial crisis. He also points out the hypocrisy in Germany’s hardline stance.
“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. We must remember that waiting in the wings should this recently elected Greek government fail is the neo-Nazi Golden Dawn party,” writes Sanders.
Sander’s support unlikely to spur action
During the financial crisis the Federal Reserve set up a swap line with the ECB as part of a broader effort to provide liquidity anywhere it might be needed, extending more than $8 trillion in hundreds of transactions. Sanders wants to use that deal as an excuse for getting involved in eurozone affairs, and apparently as a soft threat to get some leverage. Frankly, it’s hard to imagine Yellen following his lead.
President Obama has also spoken in favor of the new Greek government and the end of austerity measures in Greece, but if Obama and the Republican controlled Congress are going to put bipartisanship aside on anything, it probably won’t be to help a newly elected socialist government pay its debts.