The European Crisis and the American Elections

Even before the financial aid to Spain, which the government of Madrid strongly denies is a bailout, North American political commentators had already written extensively about the umbilical connection between the sovereign debt crisis hovering over Europe and the outcome of the American presidential elections. There was almost unanimous agreement that a European recession or, in the worst case scenario, a possible collapse of the euro before the November election would seriously compromise, possibly irreparably, the chances of a second term for Barack Obama in the White House.

It is a fact that since the financial crisis erupted in 2008, no single incumbent candidate has managed to secure an electoral victory. In the case of the United States, there was a strong message that the electorate was feeling a change of paradigm. This was in spite of the fact of that they did not have the continuity of one individual leader. Bush could not run for a third term and the Republican candidate at the time, John McCain, clearly was not a politician who followed the line of the Bush administration. In Europe it is known that no government of any of the countries that received financial intervention resisted the polls. Even Spain changed administrations before asking for financial assistance, already under the specter of bankruptcy. Great Britain, who does not have the euro and voted long before the beginning of the confusion in Brussels, chose the road of austerity proposed by the Tories, in an obvious censure of the previous Labour government. The signals are not, therefore, encouraging for Obama.

It is true that the paths followed by the United States and Europe in responding to the financial crisis were substantially different. In place of discipline and austerity, the United States preferred a stimulus—injecting money into the economy to save businesses and increasing job opportunities as much as possible. In spite of the extreme economic interdependence of the two Atlantic blocs, the United States has its own means of withstanding, again, as far as possible, the shock of a European recession.

This is where the issue becomes entirely internal. It is in the electoral interest of the president’s political adversaries that the country not resort to these means. This has been the position of the Republican bench in Congress since the beginning, and clearly now there is even less incentive for a compromise or ceding to the wishes of the administration. As James Carville wisely stated 20 years ago “It’s the economy, stupid,” which decides elections.

Some further points of view on this subject here, here and some numbers which illustrate the European economic risk to the United States here.

And here, an interesting viewpoint on the advantage of being an incumbent in American electoral politics.