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Silence Is Golden

Greece’s latest bailout won’t fix Europe—but it should help Obama in November.


Kept at bay: The deal may prevent another Greek implosion.(AP Photo/Nikolas Giakoumidis)

In the second week of February, when Greek lawmakers approved another round of austerity measures and rioters torched Athens in protest, the U.S. news media devoted 3 percent of their coverage to the European economy. That was good enough for sixth place in the Pew Research Center’s weekly tally of most-reported- on news topics, just ahead of the debate over same-sex marriage and just behind the story of a man who killed himself and his two young sons by blowing up his house. It was the first time this year that Europe’s financial woes cracked the top 10.

This week, which dawned with the report of a new Greek bailout, should be the second—and potentially last—time. If all goes smoothly (a big if), Greece’s economic travails will cease to be a story that Americans hear about frequently; they will be drowned out by the escalating presidential campaign. And that, more than any diplomatic or economic implication of the deal, could be the best news from Europe for President Obama. The less America sees, hears, and reads about Greece between now and Election Day, the better it is for the president and the worse for his Republican challenger.


Greece is a far bigger political threat for Obama than it is an economic threat to the domestic recovery. Economists say that U.S. financial institutions have largely shielded themselves from even a worst-case scenario: a debt default that forces Greece to leave the eurozone. Still, Greek debt woes have already found a home as a standard attack line in Republican campaign speeches. Greece, to GOP candidates, is where “Obamanomics” leads. Mitt Romney said in Michigan last week that Obama’s debt-inducing budgets are “taking us on a path to Greece or worse.” (Few economists make that comparison; America’s borrowing costs remain historically cheap, and, more important, the United States does not struggle with the basic issues of economic functionality—such as rampant government corruption and atrocious tax collection—that plague Greece.)

The Obama administration, it is clear from public statements, knows there is no quick end in sight to the Greek drama, which is why the White House has long favored a slow-progress strategy there: Better for European leaders to keep muddling toward an eventual solution—sustained financial aid or an outright expulsion from the common currency—than to rip off the Band-Aid tomorrow.


Better for Europe to muddle through than to rip off the Band-Aid at once.

The $172 billion bailout agreement announced on Tuesday fits that strategy perfectly. It almost certainly won’t solve Greece’s problems for good. Long term, most economists expect that Athens will need even more austerity measures, more structural economic reforms, and, above all, more growth to sustain its debt load. But by staving off an immediate default on Greek debt, the bailout should reduce this particular threat to the global economy from a boil to a simmer. That buys time for the U.S. economy to strengthen and for reform programs to continue defusing the far-more-dangerous sovereign-debt time bombs in Italy, Portugal, and Spain. It also means that an unpopular larger rescue by the International Monetary Fund (financed partly by the United States) won’t be necessary.

The bailout is “an important step,” Lael Brainard, Treasury’s undersecretary for international affairs and a critical administration player in Greek-debt negotiations, told television interviewer Charlie Rose on Tuesday. “But there are a number of additional steps that are going to be necessary to put Greece firmly on a sustainable path.” Obama’s political team would love to see those next steps play out behind the scenes rather than in street riots or market crashes from an abrupt default. The president’s campaign officials know they can’t control events in Europe—but they acknowledge privately that keeping Greece out of the news is good for their cause.

Republicans, meanwhile, say that if the bailout deal unravels and Greek tensions reescalate, the GOP nominee would have a powerful image to change the discussion surrounding what now appears to be an improving U.S. economy. “Oftentimes, campaigns become captured by events,” says Kevin Madden, a Romney adviser. In the event that the Greece situation deteriorates, he added, “this would be a case where an event would affect the trend line on the economy” and the Republican nominee would argue that “Obama’s big spending, Big Government policies have taken us to the brink, and what’s happening in Europe are a foreshadowing of what’s to come in America.”


There’s also a broader threat for Obama from Europe, Madden says: An intensifying crisis there could remind voters of past anxieties about whether he is up to his job and whether he is a decisive enough leader. Perhaps, but given the decreasing urgency of Europe’s crisis, the president’s reelection team in Chicago should feel confident that even deeper problems over there won’t grab enough headlines to break into Pew’s top two.

This article appears in the February 25, 2012 edition of National Journal Magazine.

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