Rightly preoccupied with America’s own perilous economic woes, the Obama administration can no longer ignore the stark reality that all is fundamentally not well with their greatest allies, nor is this state of affairs likely to change. The administration has come to the conclusion that a Europe mired in endemic crisis is simply not going to go away. The structural future for Europe, as seen from Washington, is bleak. European decline will either be absolute or - with a good deal of policymaking skill that has so far not been displayed and more than a little luck - relative. In either case, a Europe in decline has become a danger in a way the administration would not have found credible a short five years ago.
At the beginning of Obama’s first term, the consensus off-the-record view of the new team was that Europe was not an area they needed to give much attention to : It was neither a region of great peril as it had been during the Cold War, nor was it likely to be much help militarily (with the conspicuous exceptions of the British and the French) if called upon to do so. Yes, American foreign direct investment remains focused on the continent, but that could be easily managed.
Best to get some trusted old Europe hands to manage the relationship, all the while focusing on the Pivot to Asia, winding down the wars in the Middle East, and beginning the process of what President Obama has rightly called, “nation building at home.”
But as John Lennon sagely pointed out, “Life is what happens while you are busy making other plans.” After a score of European crisis summit meetings, endless whispering past the graveyard that the worst of the euro crisis was over, only to be proven constantly wrong, the Obama team’s attitude to Europe has evolved.
The consensus view is that Europeans have certainly failed to grasp the structural nettle of an inherent competitiveness misalignment built into the very structure of the euro. As many of us warned (and were airily dismissed at the time) a one-size-fits-all currency would produce a shambles, given a very economically heterogeneous Europe. It has not helped the credibility of today’s euro apologists that in many cases they are the exact same people who were so analytically wrong so recently about what a grand step forward currency union would be. It is almost impossible to overestimate how badly the never-ending euro crisis has affected the continent’s standing in the world, as after 500 years of global success Europe is now seen by many in the US and the emerging world as a place that simply cannot solve its problems.
The White House sees three medium-term political dangers to Europe even limping along as it has over the past several years. First, while there is undoubted borrower fatigue (most recently in Italy) there is also lender fatigue setting in. The basic European policy under Mrs. Merkel is to put off any further tough decisions until she gets through the fall parliamentary elections.
Mrs. Merkel has run the crisis as a sort of anti-Franklin Delano Roosevelt : No fireside chats for her, calmly explaining the gravity of the problem, thereby building up credibility through absolute candor. Rather, she has been typically Delphic, increasingly speaking in Orwellian generalities, trying to lull the complacent German people to sleep about the fire next door. It has worked up to now ; but there could well be a reckoning, one that would shake the very foundations of Europe.
For what may seem cleverly Machiavellian is in essence naïve. Once the German people finally wake up to the fact that taxpayers are now almost entirely on the hook for continued euro loans (either through the ECB or various EU institutions) to countries that do not seem - given non-existent growth rates and soaring unemployment - to be making demonstrable economic progress, a moment of political crisis in the euro core will be at hand.
Second, the shock Italian election results (I’d be very surprised if before the elections one-quarter of the Washington foreign policy community knew who Beppe Grillo was) have exposed for all to see not only austerity fatigue, but also the gaping democratic deficit that is preventing a mastering of the euro crisis. In a democratic country in crisis, it seems no one wants to support an unelected viceroy, no matter how well intentioned.
Mario Monti surely saved Italy from the ravages of the bond markets. But the simple fact remains that his very poor showing in the elections is largely down to the fact that he was both democratically unelected while being tasked with implementing stringent and wrenching (if necessary) economic changes. Worse, he was seen as the creature of the Brussels and Berlin creditors, sent back home to his restive European province to restore fiscal order.
To put it mildly, there is just enough truth in this to make such a narrative a godsend to populists of all stripes. The problem in Europe is that those with the economic and political power (unless you are a German) are not democratically legitimate, and those with the legitimacy (national governments) no longer seem to possess real power. This disenfranchisement is making a solution to the crisis almost impossible. To continue with an austerity program without democratic legitimacy is to fail, as only with that legitimacy comes the staying power to enact tough measures and stick to them.
Thirdly, as recent comments have made clear, it has finally become apparent to the Obama team that the long-simmering crisis of Britain’s place in Europe is at last coming to a boil, and that a train wreck is on the cards. Pushed into a corner by both the majority of his euroskeptic conservative MPS as well as the populist rise of the UK Independence Party (UKIP), Prime Minister David Cameron has pledged to try to renegotiate the very terms of Britain’s EU membership while at the same time promising the British people a long-desired In/Out referendum on Britain’s status in Europe, based upon the results.
But there is little-to-no appetite among the European elite to make any meaningful compromises, as European Council President Herman van Rompuy made dryly clear. Euro-elites are against this process because it runs counter to their very modus operandi : If Britain is allowed to unpick it relations with the EU, what is to stop every other country from doing so ? The resulting chaos would be the end of the euro-project. Moreover, many of the Brussels elite are convinced federalists (as British euroskeptics have rightly charged), and hate the very idea of power devolving away from the EU. Finally, there is a lot of bad feeling about the move, as Britain is seen as using this moment of maximum euro-peril to selfishly push for its own interests at the expense of the common good.
Given all this, it is unlikely that (should Cameron win an absolute majority in 2015, which at present looks problematic) a re-elected Prime Minister will receive much in the manner of concessions from the rest of the continent. If this proves to be the case, returning empty-handed to the UK will surely end the UK’s involvement in the European project, as an increasingly skeptical public will finally have the chance - and the proof - that membership simply isn’t worth it.
This all has just dawned on the overly complacent Obama administration, which somehow lazily assumed that all the talk of Britain leaving Europe was just some fringe preoccupation of right-wingers in both the UK and the US ; hence the recent panicky declarations that it was in the American interest that Britain stay in Europe, as though that would move anyone in either Brussels of London. But a Europe without a UK would be of little use to America as an ally : Economically embattled, militarily (without London) wholly dependent for military credibility on limited (if quite good) French arms, politically weak. The Obama administration’s sudden fear is that they will find themselves truly alone in the world.
For their last, horrible, realization is this : For all its obvious inadequacies, Europe remains the place where the vast majority of America’s true allies are located. The dramatic weakness of Europe is not a cause for scorn or neglect, but rather illustrated that the administration’s initial disregard for Europe was entirely misplaced. The Obama administration may well have to make an intellectual pivot back to a far-too-easily disregarded Europe, merely to try to salvage what is left of the American alliance system.
