“It’s very clear that the recapitalization of banks and the bailout fund aren’t large enough to sustain Italy,” let alone Greece, Angelides told Bloomberg Television’s Lisa Murphy on Wednesday.
Angelides, who is the son and grandson of Greek immigrants, said he has a personal stake in the events that have recently unfolded in Greece.
“I’ve been following the eurozone crisis very closely, not only for the implications in Europe, but the spillover effects here,” he said. “I happen to be proudly of Greek descent. My mother grew up in Alexandria, Egypt. My grandparents on my dad’s side came here from Greece, and we have many family members there.”
Looking at the last two weeks, he said it’s clear there are still unsustainable levels of debt, and “painful” deleveraging will continue.
“Up until now, all that pain [has been] borne by the borrowers here in the United States, underwater homeowners, very little by the lenders,” he said. “But take the recent, I guess, deal in Europe to stabilize the situation. They are going to reduce Greek debt to 50%. Greece can’t do that, because even with that they end up with 120% debt-to-GDP. It’s very clear that the recapitalization of banks and the bailout fund aren’t large enough to sustain Italy.”
Angelides notes both Greece and Spain have official unemployment over 20%, and are already in a depression.
“If dramatic austerity measures are forced on them are they going to go into a form of a death spiral which will make it impossible for them to pay off the debt?” he rhetorically asked.
Murphy then asked Angelides about the domestic situation, noting that although unemployment in the United States is bad, it’s not as bad as that of European countries.
“I think we’re talking really differences of degree,” he responded. “Here in the U.S. our official rate is 9%. My home state [California] is 12%. But when you take all the people who want to work full time who can’t or who have dropped off our rolls, in a sense have given up hope or are no longer counted, we probably in California have a real unemployment, underemployment rate of about 17%. What I don’t see across the U.S. now and a globe is a concerted policy, as you’d like to see in the wake of this kind of crash, to stimulate the economy.”
They have austerity measures in Europe, he said, and in the United States the focus is on reducing debt, which he says is significant but is a “long-term problem.”
“I’m very afraid,” he added. “Look, every crisis is different, but I’m very afraid we’re repeating some of the bad lessons of the early 1930s by imposing austerity regimes when we really need to be providing stimulus right now to get people working again, get wages up. We have the lowest level of wages as a ratio of GDP in this country than we’ve had since the 1930s.”