The US public is increasingly looking at leaderless Europe with trepidation
PRESIDENT Barack Obama’s official re-election launch on Saturday fell largely flat. Despite all the campaign’s attempts to generate as much hype as possible, the main electoral events captivating American politicos were taking place in France and Greece with the presidential and parliamentary elections respectively.
As Americans prepared to bid adieu to Sarkozy l’Américain and witness yet another sorry chapter in Greece’s fiscal train wreck, talk immediately turned to the wider implications for the United States if Europe abandons its semblance of austerity. Contagion resulting from a Greek default, the real possibility of a break-up of the single currency, and the nearly $1 trillion (£620bn) worth of exposure American banks have to European sovereign debt are no longer abstract discussions at Georgetown dinner parties, but very real possibilities that could have a massive influence on the outcome of November’s presidential elections.
Already there is talk of the presidential election producing its requisite October Surprise in the shape of a European financial collapse so severe, that it will either require an urgent response from the administration and Congress, or yet more aggressive measures emanating from the already exhausted Federal Reserve. Or both. With Europe now on the lips of everyone in Washington, the administration will be looking to see how – if possible – it can avoid the expected backlash a la Bush of using US taxpayer dollars to bail out not just Wall Street banks, but America’s European cousins.
The Federal Reserve’s decision late last year to bail out embattled European banks through swaps was barely reported in the US media. As the day-to-day drama of the presidential election plays out, Obama won’t have the same advantage, with members of Congress other than Ron Paul taking to the floor of the chamber to protest these measures. The administration will claim that “not a dime” of US taxpayer dollars will be at risk, but will still sell “emergency” measures in the same way Bush did – an essential move to stave off a global economic collapse. The public won’t see it that way and members of Congress will quickly realise that they have the choice between their careers or averting a potential economic meltdown.
Obama and Mitt Romney will be following European affairs much more closely than any two candidates in almost a generation, knowing all too well that the economic fate of the continent could have a major impact on November’s outcome. But even if the single currency limps on, one thing that is on the cusp of death is American political faith that Europe can act in concert and mitigate risk. Bismarck’s utterance that he always found “Europe in the mouths of those politicians who wanted from other powers something they did not dare to demand in their own name,” is more pertinent than ever. Europe has been exposed as leaderless, but with a US election looming she will find Washington more reticent than ever to pick up the baton.
Ewan Watt is a Washington, D.C.-based consultant. You can follow him on @ewancwatt