Obama, the Euro Crisis and Re-Election
From the op-eds of the Financial Times, Edward Luce smartly summed up the significance of the Euro fiasco to the Obama administration: “if Europe fails to stave off collapse, Mr Obama’s re-election prospects will be downgraded to junk”.
But why is Europe so significant to the USA? The euro area’s share of America’s overseas sales has declined to 13% from 19% back in the 90s. Moreover, having recently entered talks to join the Trans-Pacific Partnership along with Japan and other south-eastern Asian economies, the USA’s trade will focus far less on Europe in the medium to long term.
So if Europe is not significant in terms of trade, what about the continent’s hold on US banks? Early in November, Fitch, a ratings agency, reported that the US banks’ holding of precarious European debt posed a “serious risk”.
In the case of a default, Obama would be sprung into a very difficult situation: the Occupy Wall Street movement has made it clear that the public are loathe to bailing out another reckless bank but the president would undoubtedly remember the calamity after the fall of the Lehman Brothers in 2008.
It is unfortunate - especially so for a president who had embodied so much hope in 2008 - but activists from both the Occupy Wall Street and Tea Party movements pine for a style of American leadership that is no longer possible.
The Washington Consensus no longer holds much sway in the international community - especially when the country is barely limping along with a staggering 8.6% unemployment rate. The US can no longer spend its way out of troubled times. And the US cannot control the Euro crisis just as it will struggle to contain China in the coming decade.
Even if Europe’s leaders manage to navigate through the murky depths of the crisis, unless there is a strong showing from the White House in the proceedings, disgruntled american voters are very likely to plump for whoever may receive the Republican nomination next November.