US Elections: What Will Be the Impact on the Eurozone Crisis?

During his inaugural speech for the presidential race in Tampa, Fla., this week, Republican presidential candidate Mitt Romney did not talk about the euro or the debt crisis in Europe. Yet, the European situation is causing a lot of concern for the American establishment. In an election year, these fears will affect European decisions, at least in terms of timing.

A European diplomat explained that “the U.S. pressures for a lasting solution to be found are many” and “they come from all sides: the White House, the Treasury and the Federal Reserve, too.”* A few days ago, a central banker admitted the existence of the American frustration against Germany which, according to many, hinders urgent decisions such as the purchase of government bonds by the European Central Bank. This week, the Belgian business daily L’Echo carried out a survey of European and American economists using the site SurveyMonkey, which allows mini online opinion polls. Fifty percent of American analysts argued that Europe “is on the brink of the abyss.”* Only 10 percent of European economists share this sentiment. Europeans and Americans believe that Greece will probably leave the eurozone at some point in the next 12 months. Six in 10 Americans expect that Greece’s departure will result in the expulsion of other countries. Only two out of 10 Europeans agree with this analysis.

The prevailing opinion overseas is that the eurozone has been designed with too many structural flaws and that, without a strong integration, the union is bound to end dramatically. This interpretation of events has therefore led many non-European investors to sell financial assets in Europe.

According to the Bruegel Center for Global Studies, which has just set up a database to monitor this specific aspect, in 2011 the share of Italian debt in the hands of non-Italian banks dropped from 50 percent to about 40 percent. In Spain, that figure dropped to 30 percent. Speaking of the single currency, in an interview published this week by the French weekly L’Express, the American economist Paul Krugman accuses the establishment of having pursued a “romantic” idea. When referring to Greece, he explains: “I cannot see how this country can remain in the euro. It is practically impossible.” Marked by the American experience, Krugman is among those who do not understand how a monetary union without full mobility of workers can survive, and he criticizes the austerity policy pursued, which aimed at calming financial markets.

In this context, the American establishment is worried by events taking place in Europe, and the impact that they could have on the world economy. Approaching the November elections, the White House is pressuring primarily because Europe is hurrying to find lasting solutions to the debt crisis, and because nothing is irreparable, anyway. For example, Greece leaving the eurozone will happen before Nov. 6, when Americans will vote. The European leaders will have to decide at the European Council, on Oct. 18 and 19, whether to grant new money to Greece and assess Athens’ request to have more time to repay Europe’s loans. Some fear two “no” votes, but it is expected that at least on that occasion, the 17 will not be able to ignore international pressure.

*Editor’s note: This quote, while accurately translated, could not be verified.