It was a whirlwind affair. Europe’s love-at-first-sight attraction to Barack Obama grew quickly into a serious courtship in the weeks before and after his election. His inauguration signaled the promise of a healthy relationship: common interests, similar goals, mutual respect and a commitment to make it work. Consider this week the first major post-honeymoon dust-up. And like most new marriage tiffs, it has to do with baggage. President Obama is arriving in Europe for the G-20 summit, lugging an American-made economic disaster in his suitcase.
Europe may not personally blame Obama for the economic crisis, but it is watching with a raised eyebrow, to see just how the new president will tackle his inherited mess. And while Obama may be the closest thing to a social Democrat that Europe has seen in recent years, his handling of the financial crisis, so far, shows strains of a cultural gap. Nearly 15,000 people gathered this past weekend in Berlin and 20,000 in London to protest the upcoming G-20 summit.
Individual members of the European Union have done bank bailouts. (Germany bailed out its banks with 500 billion euros, the UK with 400 billion pounds.) But as a group, EU countries certainly have not reached a consensus that American-scale economic stimulus packages are the way out of the mess.
Germany, in particular, is a potential spoiler. With a coveted surplus, it is the country with the deepest pockets. It can easily stand in the way of Europe reaching a consensus on how much to commit to the stimulus plan.
Living here, one can’t help but notice a certain “I told you so” stance in the skepticism. Germany has long erred on the side of regulation. Chancellor Angela Merkel warned of the danger inherent in the lack of financial transparency back in 2007 when Germany hosted the G-8 summit. She expressed major concern over hedge funds, for example, warning that they required far greater government scrutiny. The American free market was often seen as risky and irresponsible by German government. Americans, in turn, labeled Germans as rigid and undynamic.
This week, one gets the impression that Germans are not at all that surprised to see the chickens coming home to roost.
America is not the only country feeling the brunt of German disapproval. European neighbors who have followed the stimulus initiative are also on the outs. “The same people who would never touch deficit spending are now tossing around billions,” said Peer Steinbrueck, Germany’s finance minister, referring to the British government.
One reason the stimulus plan is seen as such a stretch in much of Europe is because most European countries already shell out a huge amount in government expenditures. “The level of public spending as a proportion of GDP is much higher on this side of the Atlantic,” points out Jean-Claude Trichet, head of the European Central Bank, in an interview with the Wall Street Journal. Germany, for example, allocates almost 50 percent of its GDP to public spending (compared to only 34 percent in the United States) and sees stimulus as overstretching an already-stretched economy.
If the main causes of divorce are lack of communication and money issues, then the European-American relationship is on shaky ground, indeed. If anyone can mend the tiff or keep it from worsening, it is Barack Obama. But he has real work to do.