The rebound of the world’s markets as this week began is far from reassuring, experts warn. Across the Atlantic, the US and EU each say the other should hurry up and pull itself together, or else. In a tit-for-tat fear game, there are elections involved.
To quote Obama: “So they’re going through a financial crisis that is scaring the world and they’re trying to take responsible actions, but those actions haven’t been quite as quick as they need to be.”
Barack Obama is already re-election-campaigning, and several European countries are heating up for elections, for instance Spain, France, Germany and Italy. Admitting a share of responsibility for the debt crisis is not anyone’s idea of campaign-winning. In all these countries mentioned, public surveys are not looking good for the governments currently ruling the roost.
Another thing the Americans and Europeans have in common is that their public debts are out on a ledge without a safety net — internationally exposed — each with portions of public debt held by foreign banks. Even Greece is scary, because if it defaults, banks all over could feel the shockwaves. US lending and debt links with Europe are extensive.
No wonder each side wants the other to put its houses in order, and why EU countries of varying good-house-keeping skills want each other to prove their mettle.
Of course, with national sovereign debts in the hands of the banks, it is not surprising that their sector is under pressure from speculators.
The credit rating agencies have played a huge part in making the markets and politicians very nervous, projecting their view of whole countries’ borrowing worthiness.
Voices in Europe have accused them of seeking to influence policies and thus support the dollar — even after the agencies demonstrated weak credibility not predicting the subprimes collapse.
But still, the US says euro zone countries lack the courage to raise taxes and slash spending.
Nobel economics laureate Paul Krugman said: “If you actually look at actual actions, as opposed to rhetoric, there’s not so much difference between the United States and Europe: and so in terms of the actual policy, this convergence is unfortunately a convergence on the wrong things: fiscal austerity, hard money… but the result will be disastrous on both sides of the Atlantic.”
The president of the euro group of finance ministers, Jean-Claude Juncker, responded to American critiques saying it wasn’t out-of-work Greeks who brought down Lehman Brothers, reminding Obama on what side of the Ocean the cracks first started to appear.