(BBG) Greek Debt Crisis Risks NATO Withdrawal, New Surge of Refugees

(BBG) Greek Debt Crisis Risks NATO Withdrawal, New Surge of Refugees
By David Lerman and Nicole Gaouette

A failure to resolve the Greek debt crisis could do more than weaken the euro and cause stocks to retreat.

It has the potential to prompt a Greek withdrawal from NATO, increase the influx of refugees into Europe and threaten Greek support for international sanctions against Russia over Ukraine.

“Greece spiraling into chaos would be a significant strategic disruption for Europe and therefore for the U.S.,” retired U.S. Admiral James Stavridis, a former NATO supreme allied commander, said in an interview. “There’s more to this crisis than money and the financial markets.”

Such outcomes are possible, though unlikely, should European leaders prove unable to resolve a debt dispute that has shut Greek banks and frightened investors. Greece is on course to miss a Tuesday deadline for a $1.7 billion debt payment to the International Monetary Fund.

If Greece ultimately is pushed off the euro currency for defaulting on its debt, it could seek revenge by pulling out of the North Atlantic Treaty Organization, blocking European Union sanctions on Russia or forcing the U.S. from its naval base in Crete, said Stavridis, a Greek-American who is dean of the Fletcher School of Law and Diplomacy at Tufts University in Massachusetts.

“A Greece that feels unloved and pushed out is less likely to be helpful” to the U.S. and Europe, he said.

Refugee Flow

A primary concern is the flow of refugees from Libya and Syria, some of whom may be terrorists or become radicalized.

The Greek government may become unable to control the border, allowing migrants to “freely flow through Europe,” which already faces a refugee crisis, said Heather Conley, senior vice president for Europe and Eurasia at the Center for Strategic and International Studies in Washington.

A default also could send Greece searching for economic allies outside the EU.

“Greece will look elsewhere for getting money,” including China, said Andrea Montanino, director of the global business and economic program at the Atlantic Council in Washington.

“China is seeking investment abroad,” Montanino said. “They can think of Greece as a good place to have a stop in Europe and control partly what happens in Europe.”

While Greece may try to unravel European sanctions against Russia, Montanino said, “this is not the likely scenario. I still think the Greek people are pro-European.”

‘No Political Experience’

The greater danger is a Greece that descends into chaos because of the unpredictable nature of its governing Syriza party, which took power this year based on its opposition to austerity measures sought by the IMF, said Thomas Niles, a former U.S. ambassador to Greece under President Bill Clinton.

“We’re dealing with people who have absolutely no political experience,” Niles said of the Greek government.

Greece’s ruling coalition, which includes Communist party members, could be inclined to look to Russia for economic support, said Douglas Elliott, a fellow at the Brookings Institution in Washington who has studied the Greek crisis.

“They believe that too much power is concentrated in Germany and Brussels,” he said. “So it’s not that hard for the Russians to make the argument that it would make sense for the Greeks to align with them.”

Any such moves would undermine the European Union, which operates based on unanimity among its members.

“There clearly are serious implications for the European Union” in a Greek default, said James Dobbins, a diplomat and former ambassador to the European Community who is now a senior fellow at the Rand Corp. in Washington. “This is clearly a step backward from the major piece of European architecture, the euro.”

A failed or foundering Greece, which is a NATO ally, also poses security issues for the U.S. and Europe, analysts said.

Its location in the Mediterranean on the border between Europe, the Middle East and North Africa underscores how much is at stake if the country becomes unstable, said Conley, a former State Department official in President George W. Bush’s administration.

The U.S. operates a small naval base at Souda Bay on the island of Crete, which could be jeopardized if relations with the Greek government sour, said Stavridis, the retired Navy admiral.

Greek Prime Minister Alexis Tsipras struck a defiant tone Monday, saying European leaders don’t have the nerve to throw his country out of the euro.

After surprising negotiators with an announcement of a July 5 referendum on the European Union’s aid proposal, Tsipras plunged Greece into economic uncertainty with emergency measures that included shutting the country’s banks.

When Greece fell into civil war in the aftermath of World War II, the U.S. response was the Truman Doctrine, a massive economic aid program to shore up western Europe, said Dobbins, the Rand Corp. analyst.

While such aid would be unlikely today, “almost anything becomes conceivable” if Greece’s economy collapses, he said.

“We really are in unchartered waters,” Dobbins said. “The withdrawal from a currency like the euro is essentially unprecedented.”