European Institute

The debate over the crisis in the euro and the eurozone has thrown up a counter-argument to the theme of blaming the crisis on lax fiscal management by Athens. True, the Greek authorities mislead other governments about their real debt problem. But a deeper explanation for the crisis may lie in a recent economic pattern in which Germany has managed to stifle its own domestic demand and thus keep down inflation at home while thriving on its exports to less productive countries – such as Greece. This argument leads a worrying conclusion about the future: there can be no effective long-run way of “reforming” the eurozone, with tighter enforcement on deficit ceilings, unless the German authorities agree to stimulate more domestic consumption to replace part of its export-led growth. The alternative? If Germany succeeds in simply pushing the weaker, southern European countries into smaller fiscal deficits, the result will be a eurozone with chronically weak internal demand and growth.

This well-reported narrative of Obama's experience with European leaders appeared this month in the National Journal, a respected, high-priced weekly in Washington. The article explains why the U.S. and Europe, as far as their leaders are concerned, often seem these days to be trains passing in the night. The tenor of Will Eugland's nicely-nuanced account --
Obama's Lukewarm Start with Europe -- is confirmed, in private, by officials on both sides of the Atlantic. The text was released to European Affairs, exceptionally, from the National Journal's subscriber-only content file thanks to the help of Tim Clark. A member of European Affairs' editorial advisory board, he works for the National Journal’s parent company, Atlantic Media Co.

As revelations of sexual abuse of children by Catholic priests continue engulfing Western Europe, the Pope – who publicly pledged to revive Christianity in the Continent – finds the church, his papacy and even himself desperately on the defensive. The scandal stems not only from child molestation by priests but also from the church’s apparent decades-long cover-up of the practice and its practitioners in the clergy.

In its broadest context, the Catholic church’s scandal seems likely to reinforce other trends in European society that have weakened trust in official institutions of both church and state. In that sense, the fate of the papacy has geo-political implications – which start with the credibility of the pope himself.

By J. Paul Horne

 

President Obama’s dramatic victory on healthcare reform may have had a collateral impact in kick-starting financial regulatory reform. The conventional wisdom in Washington has been that the high political expenditure on the health bill precluded any other major legislative initiative until after the mid-term elections in November. But the passage of the health bill may have triggered a new political dynamic. Over the weekend, as the bill was passing, Republican Senators, apparently worried by their weakened overall position, withdrew hundreds of amendments to a proposed bill reforming financial regulation. The text, drafted by Senator Chris Dodd, the Democrat who chairs the Senate Banking Committee, was voted out of the committee and onto the Senate floor for debate this week.