As talks between Greece and its bondholders intensify and European Union (EU) leaders prepare for the next European summit in Brussels on January 30th, there are several decision points coming up in the long-running financial and political crisis of the European Union.
Here in America, however, while the EU's implications for our own well-being get little attention, the long-running U.S. presidential primary race already seems endlessly enervating thanks to wall-to-wall coverage of each twitch, gaffe, and guffaw on the campaign trail. It is astounding that cable networks can fill their screens with so many flying, flashing info-graphics that report not much except the horse-race story. As for the candidates’ own discourse, never have so many talked so gaseously about so little while throwing elbows and landing feet in mouths all over the place.
Thankfully we know how this will play out. Come November, with luck, we’ll have a couple of solid options and a personal decision to make: pick one. Until then, the media circus will be just that.
From a sporting or entertainment point of view, the Euro crisis — crises, really — offer much better viewing. There are dozens of key players, near daily action of major consequence, and complexities everywhere you look, all with European flair. Also, haircuts.
Viewer amusement aside, the stakes are high not just for hundreds of millions of citizens of European countries but also for Americans, and particularly in Washington state.
If the countries are considered separately, it’s hard to appreciate how crucial trade with the EU members is to our state. But taken together, the EU is our second largest export destination, a bit lower than China, significantly larger than Canada (the rankings are charted here). Major retrenchment in business with Europe will have a significant impact here at home.
The second risk, closely tied to the Greek crisis that is moving center stage, is more fearsome because the extent is unknown. There is so much angst about the so called private-sector “haircuts” (losses) that are being negotiated in the Greek troubles — and whether those haircuts will be considered “voluntary” or not — because, if they are deemed involuntary, they would be classed as defaults and likely trigger a cascading wave of financial effects.
A primary way that banks and hedge funds have attempted to “insure” themselves against potential losses has been that distressingly familiar tool of our own 2008 mortgage meltdown: widespread, opaque, and unregulated use of credit default swaps (CDS). Fervent assurances aside, no one really knows how a wave of CDS problems would ripple through the European banking system, much less through the deeply connected global banking system.
All of this makes attending to the details of the Euro crisis both interesting and important, though not easy to track through U.S. media alone. There are dramas almost everywhere you turn, from rioting in countries beset by unyielding austerity to nerve-wracking brinksmanship between heads of state, central bankers, and the temporary technocrats (mostly ex-central bankers) who have stepped in to run governments in Italy and Greece. Through it all looms the bracing refreshment of the democratic process: upcoming elections that could dramatically change the leadership in France this year and Germany the next, and which could block or thwart the technocrats’ efforts to stabilize entire economies.
On the margins there is even drama from tiny places like Croatia, which having sought to join the EU in 2003 is now poised for a national vote on the matter this Sunday. Surely the prospects and potential of EU membership must seem far dimmer now than they did so long ago.
A common theme throughout the European media coverage is near disgust for politicians’ lack of leadership in the form of a forward vision, whether bold prescriptions focused on growing economies, getting more people employed, or finding ways to keep austerity-on-autopilot from shoving the entire continent into a deep economic depression. It’s not that the solutions proposed are bad; it’s that leaders are not even proposing solutions to the bigger questions. That part, at least, feels plenty familiar to lots of Americans.
Which is why I’ll pay more attention to what's happening throughout Europe than what is happening in South Carolina or on Super Tuesday this year. There are crises of leadership, crises of management, crises of policy and democracy happening all over the EU, with repercussions for all. For a moment, America is not where the action is.
For a guide to news sites covering the European crisis news, see the box "Following the Euro crisis" on the right side.
