Wednesday, 14 September 2011

US tells Europe to act quickly on euro crisis

Barack Obama delivered some sobering words to Europe this week, saying the world economy will remain weak and destabilised unless EU leaders take action to stem the Euro crisis. It's not the first time the US has expressed frustration with what they say is a slow and inadequate European response to the situation, but the president's words were the most stark to date.

Obama said he will put the issue at the top of the agenda for the G20 meeting in France in November. "[European leaders] are taking some steps to slow the crisis but not solve the crisis," the president told a group of journalists at the White House. "The bigger problem is what happens in Spain and Italy if the markets keep making a run at those very big countries?" Few would disagree with the president on these sentiments, but it might be hard to take from a country which almost deliberately drove itself to default because of its broken political system.

The president's obvious concern, coupled with fresh fears this week that Greece will drop out of the eurozone, sent European stock markets into a steep fall early this week. German Chancellor Angela Merkel struggled to get ahead of the freefall and reassure the markets that the eurozone will stay intact no matter what, but to no avail. She told German media that a euro exit for Greece is not an option because if Greece left others would quickly follow causing a destabilising domino effect in Europe that could spark economic disaster.

But the kind of decisive action Obama is hoping for seems unlikely to materialise any time soon. What is clearly needed is greater economic union and the establishment of something resembling unified European economic policy. But such changes could take years and would most likely require changing the EU treaties – sparking a painful process of ratification and referendum in an era of Euroscepticism.

Into the abyss has stepped China. Following Obama's comments, Chinese premier Wen Jiabao told the World Economic Forum meeting in Dalian that China would consider 'bailing out' its biggest trading partner, but only if EU countries first "put their own houses in order."

The German chancellor and Greek prime minister George Papandreou are set to hold emergency talks tonight to coordinate a response to the new speculation of a Greek default and eurozone exit. Such meetings are starting to become a weekly exercise. If bold action isn't taken soon, this pattern of worry-calm-worry-calm will surely continue repeating itself.


Ben Paine said...

I do agree with Obama, the eurozone need's to sort out the crisis and Germnay need's to decide on whether it will help Greece or not. I am not sure Obama is the one to be giving that view though, given America's current predicament. Europe and the rest of the world particularly china may listen more, if he manages to sort out his own economic problems, or looks like he has some sort of solution?

Kallisti said...

I agree that "greater economic union and the establishment of something resembling unified European economic policy" would take years and be extremely difficult to get through, but as President Obama says, the current responses from the leaders are shulling deck chairs hoping that the iceberg will miss.

To achieve what needs to be done we need leadership from these leaders. They need to start educating their citizens that we are in it together, not just because we need to to succeed in the new world or that we have the institutions, but because our economies are already so dependent on each other. Our fates are connected, as campaign-Obama would say.

Such leadership is totally absent from the leaders today, like in this opinion piece by the Swedish Foreign and Finance Ministers in todays Frankfurter Allgemeine Zeitung

As for the US I hope Obama will campaign on reforming campaign financing laws. That would be the most important thing he or any president could do for America.