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          US Urges Greece to Resolve Financial Crisis Within Eurozone

   by Victor Beattie

   U.S. Treasury Secretary Jack Lew urged Greek Prime Minister Alexis
   Tsipras to find `a sustainable' solution to the Greek financial crisis
   for the sake of the global economy.  Markets are reacting negatively to
   the closure of Greek banks and the impasse between Athens and the
   European Union as Tuesday's deadline for a Greek loan repayment looms.

   Lew told the Greek prime minister Sunday it is in the best interests of
   Greece, Europe and the global economy to find a sustainable solution
   that puts Greece on a path toward reform and recovery within the
   19-member Eurozone. He said it is important all parties continue to
   work to reach a solution involving both reform and potential debt
   relief, and called on Athens to maintain financial stability.

   Lew also spoke separately Saturday with International Monetary Fund
   (IMF) chief Christine Lagarde and his French and German counterparts.
   President Barack Obama spoke with German Chancellor Angela Merkel
   Sunday about what the White House calls the critical importance of
   Greek reform and growth within the Eurozone.

   Gary Hufbauer of the Washington-based Peterson Institute for
   International Economics said the U.S. is alarmed over the potential
   wider implications of the Greek financial crisis.

   "The U.S. is concerned that the chaos in Greece could be infectious and
   will lead to doubts about Portugal and Spain and Italy and cause
   trouble, and will cause disunity in Europe's resolve with respect to
   Russia over the Ukraine situation," said Hufbauer.

   Silvercrest Asset Management chief strategist Patrick Chovanec said
   that given the breakdown in confidence between Russia and the West,
   even limited Russian financial help for Greece's leftist Syriza
   government represents a geopolitical challenge. He added that even
   though the U.S. is not directly exposed to the losses a Greek default
   represents, anything that undermines the Eurozone economy could have
   serious global implications.

   "It creates uncertainty, especially since it is taking place in a very
   disorganized way.  The immediate result in Greece will probably be an
   immense amount of pain and so markets don't like uncertainty.  They
   want to know where things are heading and nobody knows where this is
   heading," said Chovanec.

   After the Greek government's talks with its international lenders broke
   down Saturday, the European Central Bank (ECB) on Sunday decided not to
   expand its emergency loan program forcing Athens to shut the country's
   banks until July 6, keep the stock market closed Monday, and limit
   individual cash withdrawals to 60 euros daily.

   Tsipras said he will let the Greek people decide whether to accept the
   latest bailout offer in a referendum July 5.  The bailout offer would
   mean further austerity measures, possibly including pension cuts and
   higher taxes. The Greek leader is urging people to vote against the
   European offer.

   Garry Hufbauer said Greece owes the IMF nearly $1.8 billion by Tuesday,
   when the current international bailout expires and $8 billion will no
   longer be available to Athens.

   "Anybody who is owed money by Greece, which is mainly banks and the
   official creditors, the European Central Bank, they can basically say
   that what is owed to them is unlikely to be paid on a timely manner.
   They've lost the value of their loans which is a couple hundred billion
   dollars is very much in doubt," said Hufbauer.

   Hufbauer said the larger question is whether Athens will leave the
   Eurozone, which even Tsipras acknowledged will be at the heart of next
   Sunday's referendum.

   Chovanec said while Greece is a relatively small economy, the
   implications of its departure from the Eurozone could set an ominous
   precedent:

   "The problems that exist in Greece and the contentious issues between
   Greece and the rest of Europe, particularly the creditor countries of
   Europe, they exist in other countries as well, in Spain, in Portugal,
   even in Italy.  So, the concern is that whatever happens in Greece sets
   a precedent, whether that is debt forgiveness and that creates a wave
   of demands for debt to be wiped out, or whether that takes the form of
   a default or even an exit from the euro.  So, whatever happens in
   Greece, the concern is not just Greece - it's the precedent that it
   sets for the rest of European economies that are under stress," said
   Chovanec.

   Hufbauer, however, sees a possible Greek departure from the Eurozone
   that strengthens the resolve of the remaining members to stay and cites
   three reasons why Greece is a unique case.

   "One, its debt level, which is a couple hundred percent of its gross
   domestic product, two, its incompetence in managing the crisis and
   undertaking any reforms and, three, its election of a really defiant,
   rather pro-communist government," he said.

   He said that outside the Eurozone, Greece will revert to the
   traditional drachma currency and continue to shrink economically.
   Monday, global stock values, along with the euro and the price of oil,
   fell sharply.
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References

   1. http://www.voanews.com/content/us-urges-greece-to-resolve-financial-crisis-within-eurozone/2841229.html