The EU’s Financial Crisis Approach

Art Goldhammer at French Politics wonders:

How is it that Europe, with its divided leadership, was able to achieve coordination so quickly, whereas the U.S., with decisive power concentrated in the Federal Reserve and Treasury, has struggled for months to do the same and has finally arrived, it seems, only by copying the European model?

Art goes on to answer his question, in a follow up post, with a list of thought-provoking hypotheses that are worth a read. Implicit in them, though, are a couple of points that I thought I’d tease out.

To begin with, he points out that, “Europe had the advantage of a convergence point modeled on the actions taken by Gordon Brown.” The operative word here is action. For all its oft-derided difficulty in arriving at consensus, the EU member states still maintain a greater liberty of individual action in the face of crisis, which in effect creates a more diverse “marketplace of ideas.” Instead of debating about what to do until a consensus emerges, the EU consensus converges around an already applied approach. In this case, there wasn’t the luxury of time needed for trial and error. But the speed with which consensus converged around the course of action already taken lent authority to that approach.

Art goes on to say, “[T] he clash between Merkel and Sarkozy probably helped the Brown plan, since it came from neither of them.” Which is another way of saying that Gordon Brown will be either the big winner or the big loser of this crisis, depending on how his model pans out. Should he manage to hold onto power in Great Britain, and should his plan wind up saving the Eurozone, it could mark a resurgence of British influence in EU affairs, which has suffered from Nicolas Sarkozy’s tendency to “hog the blankets,” as they say here.

Finally, Art his this to say:

[T]he U.S. might have come to the new Treasury plan without the European example; things were already moving in that direction. But once Europe decided to guarantee deposits and interbank loans, the U.S. really had no choice; assets would have flown to safety in Europe without similar guarantees here.

In essence, the EU was able to pull the U.S. along in its wake. Now, globalized capital follows its own set of internal logic and can’t necessarily be translated into geopolitical terms. But once the dust clears, I don’t think this point will be lost on anyone.

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