Barack Obama backs IMF calls for Greece debt relief

“We cannot simply look to austerity as a strategy,” the US President said after meeting Prime Minister Alexis Tsipras

US President Barack Obama and Greek Prime Minister Alexis Tsipras hold a press conference at Maximos Palace in Athens, Greece November 15, 2016 (Reuters)

US President Barack Obama urged Greece’s international creditors to provide debt relief for the country’s troubled economy, backing calls by made by the International Monetary Fund.

Greece’s debt pile now stand’s at 180 per cent of its annual economic output and the country’s leaders say it cannot pay, but foreign creditors have been reluctant to allow restructuring.

“We cannot simply look to austerity as a strategy,” Obama said after meeting Prime Minister Alexis Tsipras.

Obama acknowledged the “devastating” impact of Greece’s debt crisis on its people. It is important that the country “continues to do the hard work necessary to recover,” he said, adding that, “if the only approach is cutting spending when an economy is in contraction, then the economy will only contract further.”

Greece's economy needs “space” to return to growth again, Obama said, adding he would urge creditors to allow the country to onto the path of durable economic recovery. “It is in all of our interests Greece succeeds,” he said.

In one of his last official visits before leaving the Oval Office, Obama also commended Greece's ability to meet its 2 per cent budget spending commitment to NATO despite swingeing cuts imposed in many other areas.

In a joint press conference, Tsipras praised the US president for the large stimulus package he delivered in the US after the financial crisis, which he contrasted with the austerity policies of European governments which he blamed for “stagnant” economic growth in the continent.

Tsipras said “disastrous” austerity imposed by European creditors, including Germany, had “made problems worse, not better. Greece has lost 25 per cent of our GDP while unemployment has risen to 27 per cent, and is now witnessing its first period of economic growth since 2008.

EU creditors have agreed to consider debt restructuring when the current bailout program ends in 2018. Currently, Greece holds new talks every six months to agree a new tranche of funding.