Greek elections matter here, too

It’s rarely big news when Greek voters go to the polls to elect a new government. In the past, not much of what has happened in Greece has made a big difference to the rest of Europe and especially the United States.

Not any more. With Europe in the clutches of what is being described as an “austerity death spiral,” the future of the teetering eurozone awaits the outcome of Sunday’s Greek elections. In the new-age global economy, that means the U.S. has a lot at stake as well.

Europe is an economic mess with a long list of countries perilously close to default. The so-called “sovereign debt crisis” hangs over Ireland, Italy, France, Spain, Portugal and Greece. From one week to the next, the odds rise and fall over whether these countries will be able to meet their debt obligations.

A previous European debt bailout deal for Greece included the acceptance of stiff austerity measures that sparked widespread riots, unraveled the existing government and choked off an already anemic economy. In the political chaos that followed, consensus to form a new government couldn’t be reached and elections were called.

At issue now is whether Greek voters will embrace candidates more accepting of stringent European rescue requirements, or other contenders who advocate calling the eurozone’s bluff by refusing to pay off its obligations and rejecting fiscal constraints.

The latter stance could create a crisis from which no one is quite sure how the continent would recover.

Would the European Union kick Greece out? Would other countries be emboldened to thumb their noses at Brussels, too? The one certain consequence would be uncertainty.

That would be bad news for the United States, where an already faltering economic recovery would lose even more steam as European markets contract, causing a ripple affect throughout Asia.

While there isn’t anything the United States can do to affect Europe’s political – and therefore its economic – future, Washington can learn from its mistakes. The biggest of which is that strict austerity measures and tax hikes imposed on weak economies at Germany’s insistence have stifled growth and worsened the sovereign debt and deficit problems. Europe, which had been in recovery, is now in a full-blown recession.

As tough as things are in the United States, there is a sense throughout the world that America is still best positioned to grow itself out of its debt and deficit doldrums. That’s why the nation continues to finance its debt at low interest rates. It’s called “flight to quality.”

But international confidence in the United States will be jeopardized if politicians here don’t reject as myth the oft-touted mantra that simply balancing the federal budget will suddenly revive the economy, create jobs and lower the national debt.

As Europe proves, a more enlightened approach is needed, one that achieves gradual structural reductions in entitlement spending, simplifies and flattens the tax code and limits government regulations to only those instances when they’re truly necessary.