When the American economy was in deep trouble in 2008, Europe believed itself to be partially safe from the storm. Most European banks had their capital invested in the European economy, rather than in the US (a fact that has come back to bite us more recently). The sense of security was based on the belief that the impact of an American crisis on the European continent would be mostly indirect, through a decrease in exports or, at most, through a decline of investor confidence and foreign investment. After the American bailout package and the initial recovery of the US economy, the mood was cautiously optimistic. Many believed that the bad times were over, thanks to the intelligence and decisiveness of the Obama administration and the sacrifices of the American people.
Today, it is clear that the crisis has not ended, and that it isn’t contained to the US. What before the crisis were judged to be small breaks in the walls of the European economy suddenly became widening cracks: The crisis spread from the small banks of Europe’s periphery and now affects almost all European banks and nations, with several countries struggling to prevent a default on their national debt. Today, it doesn’t even take poor policy to prolong and deepen the crisis. Mere indecisiveness (as it is currently practiced in Europe) is sufficient to prevent further European integration.
All this has had a significant impact on the transatlantic relationship. It is very different today from the relationship that Obama inherited when he took office. The Eurozone crisis isn’t the only factor in that equation – geopolitical changes like the Arab Spring have also left their mark – but the economic developments of the past years were surely important. After all, it was the refusal of the US and UK governments to apply constraints on financial markets that worsened the national debt crisis. Specifically, the American government rejected proposals to prevent financial institutions from forming unofficial cartels whose investment strategies undermined the financial situation of whole nations (as happened in Greece), and stood idly by as rating agencies developed undue influence within financial markets.
At the beginning of the crisis, some Europe-led institutions like the IMF had recommended a federal bailout of banks on the verge of bankruptcy – like Lehman Brothers – and tight control and new regulations for the US-based financial markets and investment banks. As we all know, many of these recommendations were ignored. The arrest of IMF director Strauss-Kahn (based on shaky evidence) in front of the world’s media characterized well the moment when America refused to listen to European suggestions.
Today, the tables have turned. Obama is keen to offer advice on European reform and on “credible” emergency plans. Is this a candid offer to help in resolving the crisis, or an aggressive attempt at interfering in Europe’s continental affairs? From a European perspective, the latter interpretation seems plausible. Why should the US be able to reject IMF advice (an agency which was designed precisely for the purpose it is now trying to fulfill) and expect at the same time that Europe’s leaders heed the “advice” of a friendly but foreign power? Obama’s pledge to “insulate” Europe in order to avoid the spread of its “disease” to the rest of the World economy, which, without Europe, would be out of recession, has been the final touch to what is now mostly seen as an unwanted and unasked-for interference with European politics during a sensitive time.
European leaders, like Mario Draghi, head of the European Central Bank, now feel compelled to remind the US of their role in the beginning and in the evolution of the crisis, and of their less-than-virtuous public debt. The debates have become political in nature, rather than being focused on economics. After all, Obama’s suggestions are largely similar to what Draghi himself has been preaching for the past 15 months. Yet the head of the ECB cannot bring himself to voice open agreement with the American president.
The US political establishment is proud of the effects of the bailout package in fighting the crisis. Yet many European policy-makers think that this is merely shifting the blame abroad: The relative recovery of the American economy has been obtained by deliberately pushing the pressure of financial speculation to Europe, and America has largely refused to accept responsibility for the disastrous effects of deregulation and inappropriate financial mechanisms. Private US rating agencies are entitled to (mis)judge the credit-worthiness of European nations in spite of a long and shameful history of failure in assessing the reliability of US corporations.
In this sense, the crisis has produced at least one positive effect: Today, there is a common European realization that the Eurozone is a part of the international policy game. The rest of the world – starting with the US President – is actively seeking negotiations with European leaders. It should be clear to political representatives and citizens of the Eurozone that Europe is seen as a singular entity in international politics, that it will continue to exist, and that we cannot avoid being identified with it. In this environment, the future of the European-American relationship might be most important in shaping a new European sentiment. Our common European identity is partially defined through our differences with the United States. It is not positive that this sentiment is born out of a climate of misunderstanding and reciprocal recrimination.