Peter Roff

Americans Shouldn't Have to Pay for Bailout of Greece

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May 13, 2010 RSS Feed Print
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By Peter Roff, Thomas Jefferson Street blog

 In response to growing concerns that the United States will end up on the hook for the mess that is now the Greek economy, Rep. Mike Pence and several of his colleagues have introduced legislation to bloc U.S. tax dollars from being used by the International Monetary Fund to bail out Athens or any of the other troubled European economies.

[See who is donating to Rep. Pence's campaign.]

“The American people are fed up with taxpayer-funded bailouts and deserve to know we are bailing out Greece and possibly other European countries," Pence said. "If the Obama Administration has its way, the U.S. will contribute to a nearly trillion dollar bailout of European countries with economic crises that are a direct result of wasteful government spending."

The European Bailout Protection Act would: 

  1. Prohibit any funds that have yet to be drawn by the IMF from being used to provide financing to any EU countries until all EU nations are in compliance with the debt to GDP ratio requirement in their own collective growth pact. 
  2. Require the Treasury Secretary to oppose any IMF loans to EU nations until all EU countries are in compliance with their debt to GDP ratio requirement.

While careful to point out that the proposed legislation does nothing to permanently prohibit the IMF from lending to European nations in economic distress, Pence said it was important to keep in mind that “American taxpayers should not be forced to bear the risk for nations that have avoided making tough choices.”

“This legislation would require that countries like Greece cut spending and put their own fiscal house in order, instead of looking to the United States for a bailout. We face record unemployment and a debt crisis of our own, and American taxpayers should not be forced to bear the risk for nations that have avoided making tough choices,” Pence, the No. 3 Republican in the U.S. House, said.

 

Tags:
Mike Pence,
economy,
bailout,
Greece,
European Union

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The IMF was formed to "stabilize" the "global financial system", but until recently that meant providing highly leveraged loans to small countries that were suffering liquidity or currency problems, usually due to excessive debt. In short, the IMF bails out private banks when their loans to small countries cannot be repaid.

In 2008, the IMF itself needed bailing out because it was running out of money. So it sold some of its gold. Then the global financial crisis hit and the world's economic elite decided to contribute $500 billion to the IMF "just in case" it was needed to stabilize future problems. I believe the elite new exactly what those future problems would be (excessive debts of several developed countries such as the PIIGS) and wanted to get ahead of the curve.

Here is Wikipedia's summary:

In 2008, faced with a shortfall in revenue, the International Monetary Fund's executive board agreed to sell part of the IMF's gold reserves. On April 27, 2008, IMF Managing Director Dominique Strauss-Kahn welcomed the board's decision of April 7, 2008 to propose a new framework for the fund, designed to close a projected $400 million budget deficit over the next few years. The budget proposal includes sharp spending cuts of $100 million until 2011 that will include up to 380 staff dismissals.[14]

At the 2009 G-20 London summit, it was decided that the IMF would require additional financial resources to meet prospective needs of its member countries during the ongoing global financial crisis. As part of that decision, the G-20 leaders pledged to increase the IMF's supplemental cash tenfold to $500 billion, and to allocate to member countries another $250 billion via Special Drawing Rights.[15][16]

As of May 2010 Hungary ($11.6 billion), Romania ($12.5 billion) and Ukraine (the IMF granted a $16.4-billion loan to Ukraine in 2008, of which the government has so far received $10.6 billion) are the largest borrowers of the fund.[17][18]

goodrich4bk of CA 12:56PM May 15, 2010

It's more than nervous traders, it's most of the world's top economists, studying the Greek/Eurozone situation for months, who have concluded that without a bailout (and maybe even with one, considering how late it's coming) the entire Eurozone could be plunged into a new financial crisis, maybe on the level of Fall 2008 in the US. This would then plunge Europe back into recession, including those areas that have been growing somewhat like Germany and France. That would mean, since Europe's impact on the world economy, and therefore also the US economy, is huge, that the sluggish recovery in the US could be halted or even reversed. If it's the difference, even maybe, of a new recession or a continued recovery (even a so-so recovery), then it's worth US support. Of that trillion dollar bailout, the US contribution is minimal, probably less than five percent.

stan of WI 8:14AM May 15, 2010

Please fund problem solve services. Some person have never been poor or victims. Docu problems and statements. This is very important.Come on caring republicans!! Fund housing projects. Helpful. Fund helpful business loans, maybe sports complex where may needed? Please do not allow uncaring in power of police, HOUSING, attorny , church manager postion. Disaster for needy!Thank you. New genetics, a new person!!rom 12:2kjvz. rev 12:9 kjvz, do best that you can.

andy t of IN 6:59PM May 14, 2010

Peter Roff

Peter Roff

Peter Roff is a contributing editor at U.S. News & World Report. Formerly a senior political writer for United Press International, he’s now affiliated with several public policy organizations including Let Freedom Ring, and Frontiers of Freedom. His writing has appeared in National Review, Fox News’ opinion section, The Daily Caller, Politico and elsewhere. Follow him on Twitter @PeterRoff.

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