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U.S. no longer a leader of fiscal rescue
Europe to get aid elsewhere
Question of the Day
The U.S. has stayed uncharacteristically distant as European nations struggle with their long-running debt crisis, creating an opening for big emerging nations such as China and Brazil to move to center stage in world economic affairs.
U.S. leaders have steadfastly refused to contribute any funding to help debt-strapped European countries such as Greece and Italy, citing massive and unresolved debt problems of their own. But Brazil, Russia and a few other emerging nations that are flush with cash are offering a helping hand.
Analysts expect China — which has more than $3 trillion of foreign exchange reserves and is uniquely positioned to come to the rescue of its biggest export market — to eventually provide critical funding.
The price of such assistance is likely to be, however, greater power and influence for such developing nations within the Group of 20 and the International Monetary Fund, where the U.S. traditionally has been the leader.
While the U.S. stance against intervening in the European crisis is not illogical — and is welcome even in Europe where political leaders want to decide things for themselves — it is notable in that it is the first time since the U.S. emerged as the world’s largest economy after World War II that it has failed to take a leading role in resolving a major financial crisis.
“The world has changed. The U.S. is no longer central” to efforts to deal with every economic crisis, said David Gordon, a director at the Eurasia Group. He noted that the U.S. in the past has organized coalitions to contend with hot spots such as the Latin American banking crisis in the 1980s and the Asian financial crisis in the 1990s, while putting “a lot of resources into play.”
Today, “the U.S. is not part of the solution,” he said. Rather, the spotlight has been on the two biggest economies in Europe and their leaders, German Chancellor Angela Merkel and French President Nicolas Sarkozy.
President Obama, who adopted a “leading from behind” stance in the Libyan civil war and other situations, occasionally puts in an encouraging word. But U.S. leaders mostly have been sitting on the sidelines, urging action and sometimes criticizing their peers in Europe for not moving fast enough or aggressively enough to stem the financial hemorrhaging in the global stock and debt markets.
European leaders have pointedly rejected U.S. criticism that they are not moving rapidly enough to contain the crisis, insisting that they must take their time to forge a lasting solution for the complex grouping of 17 nations that make up the European Monetary Union.
“This process won’t last weeks. It won’t last months. It will last years,” Mrs. Merkel said in a Wednesday speech to the German Bundestag, which elicited groans in the backrooms of Washington.
Beyond the obvious differences between the U.S. and Europe over how to handle the crisis, Mr. Gordon attributed the disengagement in the U.S. to political and financial constraints in a nation where voters overwhelmingly oppose providing financial aid to other nations, especially those perceived as having enough money of their own.
It is not because the crisis in Europe is unimportant, he said. In fact, the White House and Federal Reserve have acknowledged that any unraveling of the crisis on the other side of the Atlantic could create a financial tsunami that would derail the tepid U.S. economic recovery in coming months.
Treasury Secretary Timothy F. Geithner has engaged in shuttle diplomacy, meeting with European leaders in private and urging action, while cheering and offering suggestions from the sidelines. Even Federal Reserve Chairman Ben S. Bernanke, who analysts say doubtlessly loses sleep from time to time over the potentially cataclysmic effect the crisis could have on the Western world’s banking system, has played a mostly subordinate role.
Mr. Bernanke described the U.S. at one point as an “innocent bystander” being buffeted by the financial and economic fallout from the crisis like everyone else.
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