Saturday

24th Feb 2018

Analysis

Eurozone crisis spooks US election

  • It didn't work: Obama has tried to get the euro-crisis off his back, but scrappy EU leaders are not helping (Photo: The White House)

What does Greece have to do with the next US president? Or the current debate about a "political and fiscal union" in Europe?

Readers tempted to shrug shoulders and say "not much" would be ill-advised. The main topic in the US campaign ahead of the 6 November presidential elections is the economy. And Europe has become the bogeyman for the Republican camp.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

"I see our President making us more and more like Europe. I don't want to be like Europe, I want to be like America," Republican candidate Mitt Romney said on Sunday (12 August) during a campaign event in North Carolina.

His freshly announced running mate, fiscal hawk Paul Ryan, joined in: "If president Obama's policies of borrowing, taxing and spending worked, we would be entering a golden age along with Greece."

Media mogul Rupert Murdoch added insult to injury. "Now we can choose between the Greek and the US dream," he tweeted after Ryan was announced as Republican vice-president nominee last week.

Meanwhile, President Obama is on the phone every week with at least one big EU leader - Italy's Mario Monti, France's Francois Hollande, Spain's Mariano Rajoy.

His treasury secretary, Timothy Geithner, recently went all the way to the northern German island of Sylt where finance minister Wolfgang Schauble was on holiday. The efforts to save Europe seem frantic - banking union, bond-buying. Meanwhile, Germany is stalling everything.

With a close race ahead - Obama has an average of 4 percent ahead of Romney in the first half of August, according to RealClearPolitics - the fear in the Democratic camp is that if the eurocrisis gets worse and spills over, there will be no way for Obama to win this election.

Already the US recovery from the 2008-2009 financial and economic crisis is starting to slow down to 1.5 percent GDP growth in the second quarter, the weakest pace in a year.

"We're going to have some continued headwinds over the next several months. Europe is still a challenge," Obama said on 30 July at a campaign fund raiser in New York.

"I don't think ultimately that the Europeans will let the euro unravel but they are going to have to take some decisive steps."

"I am spending an enormous amount of time trying to work with them, and Tim Geithner is trying to work with them. The sooner they take some decisive action, the better off we're going to be," he added.

A pollster's view

Bruce Stokes from Pew Research Centre, a US-based pollster, told this website that the euro crisis is the "single most important issue that could cost Obama the elections."

He said US citizens surveyed are in general very little informed about the euro crisis and that if news suddenly broke that markets are in meltdown and exports are no longer flowing to Europe, they would "not know where this comes from and blame it on Obama. He's the one in the driving seat."

Romney's decision to side with Germany and the fiscal hawks in Europe is a projection of his conservative, 'small government' ideology upon the old continent, without much analysis of whether too much austerity is not the solution, or whether Spain in fact has less debt, proportionally, than the US, Stokes explained.

"It is really just about big government versus small government and often not that well informed. This has nothing to do with what is actually going on in Europe," he said.

In an op-ed published in the German finance paper Handelsblatt, Romney's senior economic adviser, Glenn Hubbard, in June criticised the Obama administration for advocating eurobonds and direct recapitalisation of Spanish banks by the eurozone bailout funds.

"This advice is unwise and reflects a limited understanding of the source of the crisis and a growth-oriented economic path forward," the Romney consigliere wrote.

"While offering advice to increase deficit spending in the eurozone, President Obama presides over unprecedented peacetime deficits in the United States, where a debate over 'growth' versus 'austerity' policies also rages," he noted, even though much of current US debt was in fact accumulated prior to the Obama administration, during former president George W. Bush's "war on terror."

Hubbard's recipe - allowing Greece to exit, while helping other eurozone countries stabilise their economies in the next two years - must have sounded appealing to many German politicians who in recent months have increasingly floated a Greek exit as a credible scenario.

Meanwhile, if multi-millionaire Romney wins, he would become a president twice richer than all his previous eight predecessors combined, and with considerable mystery surrounding his tax returns and offshore accounts.

As a man who made most of his money in risky investments via his venture capital fund, with millions of dollars in campaign contributions from the financial sector, he may have a strong incentive to undo even the timid regulatory moves pushed by Obama after the 2008 bust.

"Republicans in Congress are now blocking the money needed to implement the new law on financial sector regulation, for instance to hire extra staff in the regulatory bodies," Stokes pointed out.

US banks getting bigger

Even though there has been a popular backlash against bailing out Wall Street - such as the Occupy movement last year - "this is not an issue at all in the campaign," the pollster said.

The five largest banks in the US are now bigger than before the crisis first erupted in 2008.

"Obama has yet to articulate a clear message, a positive message, on why he should be re-elected. 'It could have been worse without me' doesn't really sell," Stokes said.

Obama 'very engaged' in eurozone rescue talks

US President Barack Obama is "very engaged" in talks with EU leaders on the eurozone rescue, but is keeping his advice behind closed doors rather than adding to the "cacophony" of solutions floated publicly, Washington's envoy to Brussels has said.

Baltic states demand bigger EU budget

The leaders of Estonia, Latvia, and Lithuania say in a joint letter that they are open to talks on creating "new own resources" for a bigger EU budget after the UK leaves the EU.

EU-Latin America trade talks move to 'endgame'

Senior negotiators in the EU-Mercosur talks will meet in Brussels on Friday to work out the technical bits of a possible trade deal, after top political officials gave the talks a final push.

Opinion

Greek government's steady steps to exit bailout programme

Growth predictions are positive, exports increasing, unemployment dropping and credit-ratings up, says the head of Greece's Syriza delegation to the European Parliament. Now the government in Athens is looking to design its own reform programme.

Analysis

We are not (yet) one people

Talks on the next EU budget will start on Friday. Brussels wants to do much more than before – and needs a lot more money. But arguing about funds won't be enough.

News in Brief

  1. EU calls for immediate ceasefire in Syria
  2. UK's post-Brexit vision is 'pure illusion', Tusk says
  3. EU leaders express solidarity with Cyprus in Turkey drill row
  4. EU to double funding for Sahel forces
  5. EU parliament president: 'The immigration problem is Africa'
  6. May to unveil EU departure strategy next week
  7. Pregnant workers may be dismissed, EU court rules
  8. Romanian minister demands anti-corruption prosecutor fired

Stakeholders' Highlights

  1. ILGA EuropeAnkara Ban on LGBTI Events Continues as Turkish Courts Reject NGO Appeals
  2. Aid & Trade LondonJoin Thousands of Stakeholders of the Global Aid Industry at Aid & Trade London
  3. Macedonian Human Rights Movement Int.European Free Alliance Joins MHRMI to End the Anti-Macedonian Name Negotiations
  4. Mission of China to the EUChina-EU Tourism Year to Promote Business and Mutual Ties
  5. European Jewish CongressAt “An End to Antisemitism!” Conference, Dr. Kantor Calls for Ambitious Solutions
  6. UNESDAA Year Ago UNESDA Members Pledged to Reduce Added Sugars in Soft Drinks by 10%
  7. International Partnership for Human RightsUzbekistan: Investigate Torture of Journalist
  8. CESICESI@Noon on ‘Digitalisation & Future of Work: Social Protection For All?’ - March 7
  9. UNICEFExecutive Director's Committment to Tackling Sexual Exploitation and Abuse of Children
  10. Nordic Council of MinistersState of the Nordic Region 2018: Facts, Figures and Rankings of the 74 Regions
  11. Mission of China to the EUDigital Economy Shaping China's Future, Over 30% of GDP
  12. Macedonian Human Rights Movement Int.Suing the Governments of Macedonia and Greece for Changing Macedonia's Name

Latest News

  1. EU agrees budget to focus on defence, security and migration
  2. EU leaders nix transnational lists, cool on 'Spitzenkandidat'
  3. Regions chief: calls for smaller EU budget are 'impossible'
  4. Election fever picks up This WEEK
  5. EU-Morocco fishing deal casts doubt on EU future foreign policy
  6. EU leaders put 'Spitzenkandidat' on summit menu
  7. European far-right political party risks collapse
  8. The key budget issues on EU leaders' table

Stakeholders' Highlights

  1. Swedish EnterprisesHarnessing Globalization- at What Cost? Keynote Speaker Commissioner Malmström
  2. European Friends of ArmeniaSave The Date 28/02: “Nagorno-Karabakh & the EU: 1988-2018”
  3. European Heart NetworkSmart CAP is Triple Win for Economy, Environment and Health
  4. European Free AlllianceEFA Joined the Protest in Aiacciu to Solicit a Dialogue After the Elections
  5. EPSUDrinking Water Directive Step Forward but Human Right to Water Not Recognized
  6. European Gaming & Betting AssociationGambling Operators File Data Protection Complaint Against Payment Block in Norway
  7. European Jewish CongressEJC Expresses Deep Concern Over Proposed Holocaust Law in Poland
  8. CECEConstruction Industry Gets Together to Discuss the Digital Revolution @ the EU Industry Days
  9. Mission of China to the EUChina-EU Relations in the New Era
  10. European Free AlllianceEnd Discrimination of European Minorities - Sign the Minority Safepack Initiative
  11. Centre Maurits Coppieters“Diversity Shouldn’t Be Only a Slogan” Lorant Vincze (Fuen) Warns European Commission
  12. Dialogue PlatformWhat Can Christians Learn from a Global Islamic Movement?