Europe Still Matters

The recent speech about the threat of NATO stagnation incited a debate on the other side of the Atlantic about the state of transatlantic relations. Richard Haass, the president of the Council on Foreign Relations, wrote in a recent Washington Post article, “Why Europe No Longer Matters.”

Even though the military alliance between Europe and the United States might be experiencing an identity crisis, the idea that this extends to other areas of the relation were refuted by John Lipsky’s European trips. Lipsky, the head of the International Monetary Fund urged for more European integration — for more Europe.

The fact that Lipsky merely represents the IMF notwithstanding, the U.S. government has been supportive of the E.U. bailout of Greece. Lipsky has been increasingly distancing himself from Dominique Strauss-Kahn, whose attempted rape of a hotel maid excluded him from the conversation. DSK had traveled around Europe with a diplomatic finesse, urging European leaders to loosen their purse strings for another aid package for the ailing Greek government. However, Lipsky was the one who publicly demanded a concrete E.U. aid package at the G-8 meeting in Deauville, against the wishes of Angela Merkel. It is expected that the extra money will be added to the already existing pool of credit worth nearly €110 billion.

Berlin, wary of hostile public opinion, wanted to discuss the details of the new aid package in the fall at the earliest. Lipsky, supported by U.S. diplomats, pressed the Europeans to start working on it in June. The IMF warned (blackmailed?) that without clearly stated steps to solve the Greek crisis, it would be forced to block any future transfer of credit to Greece, resulting in its bankruptcy and causing huge problems for the euro zone. Lipsky explained that the rules of the IMF required him to do that, but politicians in Brussels grumbled that DSK presented a better approach and that he wasn’t as harsh as Lipsky was.

During the summit of E.U. finance ministers in Luxembourg, it was Lipsky (and other White House officials via telephone) who pressed the Europeans to draw up a clear course of action in regards to supporting Athens. Paradoxically, Lipsky was filling in for the French finance minister, Christine Lagarde (because she was running for DSK’s former seat, she wanted to appear neutral), who traditionally promoted, in opposition to Germany, greater European generosity in bailing out the E.U. South.

The IMF chief publicly warned that the debt crisis might cancel out the profits of the E.U.’s economic recovery and that the crisis virus might spread from the outlying countries (i.e., Greece and Portugal) to the core of the E.U. In addition, the IMF’s report, published on June 20, called on European leaders to stop “unproductive debate” and agree to a more “unified approach” to combat the crisis. Interestingly enough, the report mirrored the language of appeals sent by Barack Obama to Angela Merkel a year ago when Berlin opposed the Greek bailout (the final sum came out to be €110 billion).

U.S. concern over Europe’s finances is not merely altruistic, as the collapse of the euro zone would shake up the global markets. It also shows that even though Europe might be becoming less important militarily, in terms of economics it is still very important.