Zelenskyy Attends G-7 Summit, Wall Street & Default, Greek Elections
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PRESIDENT JOE BIDEN: This goes in stages. I've been in these negotiations before.
AYESHA RASCOE, HOST:
America's flirtation with default distracts talks in Hiroshima.
SCOTT SIMON, HOST:
As Ukraine's president arrives there. I'm Scott Simon.
RASCOE: I'm Ayesha Rascoe. And this is UP FIRST from NPR News.
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RASCOE: We'll have the latest from the ongoing G-7 summit.
SIMON: And the good news is that markets think the U.S. will make good on its obligations by raising the debt ceiling. The bad news? They liken it to...
LIBBY CANTRILL: Passing a kidney stone. We all know it will pass. It's just a question of how painful it will be.
RASCOE: Let's hope nobody has to break out the lasers. And Greek voters go to the polls this weekend in a nail-biter of an election.
SIMON: So please stay with us. We've got the news you need to start your weekend.
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SIMON: First up, Japan and the meeting there of leaders from the world's wealthiest democracies.
RASCOE: At the top of the agenda is Ukraine. Ukrainian President Volodymyr Zelenskyy arrived today to attend the summit in person - that just as President Biden and other leaders opened the door to providing fighter jets to Ukraine.
SIMON: But debt ceiling talks back in Washington, D.C., are also on the minds of everybody. We turn now to NPR White House correspondent Scott Detrow, who's in Hiroshima. Scott, thanks so much for being with us.
SCOTT DETROW, BYLINE: Hey. Good evening, Scott. How are you?
SIMON: Fine, thank you. There were - that's right. It's evening there. Morning here, my friend. Volodymyr Zelenskyy's trip to Japan - brooded about, reported online, but now he's actually there, I gather.
DETROW: He is. He arrived today. And this comes right in the middle of an extended charm offensive from Zelenskyy, which is coming ahead of what we expect will be a major military offensive from Ukraine. Zelenskyy, remember, had not left the country much, for obvious reasons, for much of the first year of the war. And he had that dramatic trip to Washington at the end of last year. And more recently, Zelenskyy has been visiting heads of government in several countries to pressure them to keep supporting Ukraine as military costs keep going up and as the war keeps dragging on. The trip to the G-7 comes immediately after Zelenskyy made a similar case to the Arab League in Saudi Arabia the other day. We do not know much about his exact agenda here in Hiroshima, though the White House is indicating he will almost certainly have a one-on-one meeting with President Biden on Sunday.
SIMON: And I gather there's a major welcoming gift in the offing. President Biden now indicates that he would support Ukraine acquiring F-16 fighter jets from Western countries. That's a change, isn't it?
DETROW: And it's a much larger gift than they had in the gift bags for the reporters covering this summit.
SIMON: (Laughter).
DETROW: I mean, look. But on a serious note, this is a huge escalation in how the U.S. and its allies are arming Ukraine. Ukraine had been begging for these jets for more than a year. Biden resisted. He was worried that this could be something that would lead Russia to broaden the war and perhaps retaliate against other countries. But now, this week, Biden has told other G-7 leaders the U.S. will support efforts to train Ukrainian pilots on F-16 fighter jets and begin conversations about how to get F-16s from other countries to Ukraine. And at a briefing today, national security adviser Jake Sullivan said the U.S. has adjusted its position based on how Russia has waged its war and how Ukraine has responded. He also told us that as the U.S. has increased the magnitude of the weapons it's providing, one key thing has been getting promises from Ukraine that it will not use them to attack inside Russia. And he indicated that that promise would be key when it comes to these F-16s.
SIMON: Of course, back at home, the president faces this growing crisis over the debt ceiling. He apologized to Australia's prime minister for having to cancel his planned visit there next week to get home sooner to deal with whatever's going on.
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BIDEN: And again, I truly apologize to you for having you to come here rather than me being in Australia right now. But we have a little thing going on at home I got to pay attention to.
SIMON: Because in Washington, D.C., negotiations briefly stopped yesterday. They've resumed. What's the White House say, Scott?
DETROW: There were pretty mixed messages today, which was interesting. Right after that brief pause in negotiations, press secretary Karine Jean-Pierre said, look - there are big differences. The talks may get difficult, but the White House is confident they can find an agreement. Then a few hours later, communications director Ben LaBolt issued a statement really blasting House Republicans, implying they are negotiating in bad faith. And then after that, President Biden was asked about this. And he said he is confident the U.S. will not default, and he indicated he thought negotiations were going pretty normally.
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BIDEN: This goes in stages. I've been in these negotiations before.
DETROW: Biden said he still believes the U.S. will avoid default, and he will be back late Sunday to rejoin talks in person. And one observation I had on this - the White House is doing a very strange dance here of continued to insist it is not in negotiations over the debt ceiling, even as it negotiates over the debt ceiling. I mean, they're negotiating the budget here. But if the White House can't strike a deal to get the Republican-controlled House to raise the debt ceiling, the U.S. will run out of money and default on its debt.
SIMON: NPR's Scott Detrow in Hiroshima. Thanks so much, Scott.
DETROW: And, Scott, I have bad news. The Toyo Carp lost today, 1 to nothing.
SIMON: Oh, my gosh, my favorite team. Who beat them? Do you know?
DETROW: The Hanshin Tigers.
SIMON: Oh, my gosh. All right. Thank you.
DETROW: Thank you.
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RASCOE: And now for a little more on the debt ceiling.
SIMON: As we just heard, it is a subject of concern at the summit in Hiroshima. And, of course, it's dominating the news in Washington, D.C., where negotiations are occurring.
RASCOE: But what about Wall Street, especially now that the Treasury Department says the U.S. could be days away from being unable to pay its bills, threatening the global economy? For that, we have NPR's David Gura. David, welcome.
DAVID GURA, BYLINE: Thanks, Ayesha.
RASCOE: So how worried is Wall Street about a potential default, or are they just shrugging this off?
GURA: Yeah. We're seeing some turmoil in the bond market, less volatility in stocks. And my sense is Wall Street has been confident, pretty sanguine actually, about this. And it's funny. I said that to Libby Cantrill, who's a managing director at PIMCO, a company that manages some of the world's largest bond funds, and Libby corrected me. She said Wall Street's preferred term is constructive. Wall Street has been constructive this will get resolved without a default. Like many investors, Cantrill believes that Washington is going to figure this out. It may go down to the wire, but in the final minutes of the 11th hour, there's going to be a deal.
CANTRILL: One staffer on Capitol Hill likened this - the debt ceiling - to passing a kidney stone. We all know it will pass. It's just a question of how painful it will be. And, you know, while graphic, I think that's an apt analogy for this process.
GURA: Pretty graphic. Cantrill was a congressional staffer before she got into business, and she says it's in no politician's interest to bring about a default. And she is sure everyone who's involved in these negotiations, Ayesha, recognizes it would be a catastrophe if the U.S. were to default on its debt for the first time in history.
RASCOE: Catastrophe. Obviously, that is the worst-case scenario. Like, how are investors getting ready for that?
GURA: So this would be really bad. Let's underscore that. But investors and strategists I talked to were all very candid about how much they don't know about what would happen if the U.S. were to default. Again, we haven't been here before, but they're thinking this through, and the uncertainty alone is bound to be a problem. People would be waiting to see what happens, how this would shake out, and at the very least there'd be a big sell off. We just can't quantify how big that would be.
Now, if we go back to 2008 when we were on the precipice of the global financial crisis and Congress didn't approve a $700 billion rescue package, the stock market had one of its worst days ever. Many economists say we'd face another global financial crisis if there were a default, and a default would have a profound effect on the value of U.S. government bonds, on U.S. treasuries, which are seen and have been seen as some of the safest investments in the world. This is debt held by companies and countries, and treasuries are used as collateral in all kinds of transactions.
RASCOE: And it would seem like this would have a negative impact on the average person, right?
GURA: Yeah. It would cost the U.S. a lot more to sell debt, given investors would want more protection on what would seem like a riskier bet than before. This would have ripple effects. If there's a default, borrowing costs would go up. And just think about mortgage rates, which already have risen because the Federal Reserve has hiked interest rates to fight high inflation, they would climb even higher. Seema Shah is the chief global strategist at Principal Asset Management. She's watching all of this unfold from London, where she's based. And she told me this is happening at a really unfortunate time.
SEEMA SHAH: There are already significant pressures on the U.S. economy. It cannot afford to have another major shock landing on its head.
GURA: Shah echoed what we've heard from economists and the Treasury secretary and the Federal Reserve chair and many other policy analysts and policymakers that a default would kick start a recession, and there would be another global financial crisis like the one we saw back in 2008 and 2009.
RASCOE: You started off by saying Wall Street is basically pretty chill about this because investors at this point, they've seen this show before. They know that oftentimes Congress just kind of waits till the very last minute and then they do something. I mean, are they at the point where they just look at this as the new normal?
GURA: Yeah. And they think that they know how this movie is going to end. I think that's definitely the case, so long as the U.S. has this limit on how much it can borrow. And this week we did see business leaders get more engaged with this process. More than a hundred executives wrote a letter to President Biden and to congressional leaders urging them to raise the debt limit, warning them of the consequences of inaction. The Treasury secretary met with a couple dozen bank CEOs. You can be constructive and frustrated, which I think many investors are. Many of them also are resigned to the fact that this is, for better or worse, how Washington works today and this debate, and this threat of default is going to keep cropping up in the future.
RASCOE: NPR's David Gura. Thank you so much for joining us.
GURA: Thank you.
RASCOE: Voters in Greece go to the polls tomorrow for parliamentary elections that are being described as the most unpredictable in years. They come three months after the country's deadliest train crash in which 57 people died.
SIMON: Many of those who died were students, and the crash stirred widespread anger towards the country's leadership. Reporter Lydia Emmanouilidou joins us now from Athens. Lydia, thanks for being with us.
LYDIA EMMANOUILIDOU, BYLINE: Thanks for having me, Scott.
SIMON: How does this train crash become an issue in the election?
EMMANOUILIDOU: Well, the political backlash after the train crash in late February was massive. It sparked huge protests, as you said, especially among young people, but really across the board. There was so much outrage among Greeks who blamed the country's political establishment for the safety failures that led to the accident. People called on the Greek prime minister, Kyriakos Mitsotakis, to resign. He did not. He's running for reelection. His conservative New Democracy Party, though, did see its lead in the polls narrow. And the left-wing opposition party, Syriza, which is headed by the former Greek prime minister, Alexis Tsipras, is trailing only a few points behind. And then there are some smaller parties on the far right and the far left that have gained some ground. This, coupled with new election rules this year, means that there's probably not going to be an outright winner in this round of elections. A second round is preliminarily penciled in for July.
SIMON: Greece, of course, was at the center of the eurozone economic crisis 14 years ago. The economy is better now. How much are economic issues at the center of these elections?
EMMANOUILIDOU: Yeah, well, inflation and the economy are the top concerns for people in this country, according to polls. Many Greeks are not able to keep up with soaring food costs and with energy bills that skyrocketed after Russia's invasion of Ukraine. And according to official figures, a good portion of Greeks are at risk of poverty. Greece's economy, though, has come a long way over the past decade, and the Greek prime minister can take some credit for that. He's brought in foreign investment, cut corporate taxes, and we've seen unemployment rates dropping, GDP growing and the minimum wage and pensions. And the prime minister says that if he's reelected, there's more economic growth on the way.
SIMON: Given all this measurable progress, why are the elections so close?
EMMANOUILIDOU: Well, even though there has been economic progress, the prime minister's critics say there's also been some backsliding, that there are some issues that threaten the rule of law. One issue is this long-brewing spying scandal that the prime minister has been at the center of. He and his government are accused of using spyware to monitor journalists and political opponents. Also, media freedom in the country has declined, according to monitoring groups. In fact, the annual index by the nonprofit Reporters Without Borders - it ranks Greece dead last in the EU for media freedom. And finally, this administration is accused of illegal and violent returns of migrants who tried to cross into Greece through neighboring Turkey. The government has long denied so-called pushbacks, but evidence that they're happening systematically is mounting. Now, I can't say whether the prime minister's party will lose votes over these issues. It's possible that the hard-line policies at the border, for example, will actually win over some voters on the right. But this is the cloud of issues hanging over this election less than a day before polls open here in Greece.
SIMON: Lydia Emmanouilidou in Athens, thanks so much.
EMMANOUILIDOU: Thank you, Scott.
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SIMON: And that's UP FIRST for Saturday, May 20, 2023. I'm Scott Simon.
RASCOE: And I'm Ayesha Rascoe. Tomorrow on this podcast, making do along the Colorado River during a second decade of megadrought.
SIMON: Today's episode of UP FIRST was edited by Roberta Rampton, DeSean Tahia (ph), Rafael Nam, Hadeel Al-Shalchi and Ed McNulty.
RASCOE: It was produced by Andrew Craig and Danny Hensel and directed by Michael Radcliffe with engineering support from Hannah Gluvna.
SIMON: Evie Stone is our senior supervising editor. Our executive producer is Sarah Lucy Oliver, and our deputy managing editor is Jim Kane.
RASCOE: And for more news and interviews, books and music, turn on the radio every Saturday and Sunday morning for Weekend Edition from NPR News. Find your NPR station at stations.npr.org.
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