Interview: U.S. president's economic agenda may trigger trade war, says Greek expert

Ten years after the start of the biggest international economic calamity in post-war history, U.S. President Donald Trump's economic agenda is likely to bring a new circle of debt crisis and threatens to trigger a trade war globally, according to a Greek expert.

"The protective measures -- starting with the imposition of duties on imported goods -- not only may cause a new currency war, but a trade war as well, and they can also trigger a new international debt crisis," Kostas Melas, Professor of Economics at Panteion University, Athens told Xinhua in a recent interview.

As Melas highlighted, the risk of initiating trade wars between the United States and the countries that have large surpluses in their international trade is extremely high.

Another factor of uncertainty would be the change of the exchange rates of major international currencies. "This concerns, in particular, the U.S. dollar, which is the main reserve currency," Melas explained, saying the rate change of the major currencies may have dangerous repercussions on global economy.

For Melas, the global financial crisis of 2007 which began in the United States showed strongly how the financial system affected the growth of the global economy.

"A completely deregulated financial system, without regulatory standards, systematic control and supervision cannot be the engine of growth for the global economy, but it is a huge source of risk with terrifying and painful consequences for the economies of planet," he said.

Despite the global downturn, the United States reacted in the right way to the great crisis of 2007 managing to limit it to simple economic downturn and not let it become a major recession, Melas said.

According to the figures, the GDP growth rate was positive and quite satisfactory in the period after the crisis. The economic policies of former U.S. President Barack Obama and the monetary policy of the Federal Reserve contributed decisively to reducing unemployment in the United States, according to the Greek economist.

The United States rescued their banking system and at the same time, they voted a new institutional framework in which they attempted to set some basic settings and increase the control and supervision of the financial sector.

Melas stressed that the new U.S. president wants to abolish this law and return to the previous status of full deregulation.

RESCUE OF GREECE

Regarding the Greek case, Melas said no country of the size and economic potential of Greece can ignore for long the limitations posed by the economy and the international environment.

"In Greece the consequences of the global economic crisis, primarily occurred with the inability of refinancing the high debt due to strong imbalances of the Greek economy (high budget deficits and high deficits in the current account)," he said.

The rescue of Greece came along with a multi-billion-euro aid package by International Monetary Fund and European counterparts that support an austerity and reform program since 2010 to avoid a chaotic default that could also hit European and global economy.

"Unfortunately, the logic and the measures adopted did not result in a correct and quick recovery of the Greek economy imbalances with an unbearable alternative cost," Melas stressed.

Seven years after the implementation of the bailout programs, the uncertainty continues mainly derived from the "false requests of creditors (mainly Germany and IMF)," which "do not follow with any economic logic," as Melas said.

"Unimaginable demands for further fiscal adjustment (high primary surplus of 3.5 percent for ten years) are contrary to the needed economic policy for the growth of GDP and employment," he explained.

Melas pointed also to the role of the European Central Bank. "While it should help increase the liquidity of the Greek economy in order to facilitate the implementation even of this wrong program, it waits for the implementation of the program before starting to help," he said. Endit