30 - Relations with the US on the euro crisis

Europeans sought support from Americans, in particular at the IMF. But this support was limited and has been accompanied by pressures.

The euro crisis throughout 2011 made Europe dependent on support from other countries and regions. While the US was not in a position to help directly, for example by contributing to the EFSF (if only because its deficit and debt were higher than that of the eurozone as a whole), there were other ways in which it could help Europeans. At the technical level, the US Federal Reserve kept swap lines open with the ECB and co-ordinated with the central banks of Canada, Japan, Switzerland and the UK to facilitate the provision of liquidity during the autumn. At the IMF, the US supported programmes for eurozone countries including Greece and Ireland in 2010 and Portugal in 2011 and contributed according to their 16.5 percent quota. Washington also backed Europeans in their quest to retain the directorship of the IMF when Dominique Strauss-Kahn was forced to resign abruptly. Admittedly, there was no obvious alternative, and Washington traditionally gets the number two job at the IMF and the directorship of the World Bank in this cross-support arrangement with Europeans. Nevertheless, the Obama administration’s support was important in Christine Lagarde’s appointment in June.

In terms of political positioning, the record was slightly more mixed, if only because Europeans were themselves divided about how to solve the euro crisis. On the one hand, the Obama administration sent the right signals of confidence to the markets for the solutions found by Europeans, especially at the G8 and G20 meetings in Deauville and Cannes, respectively. On the other hand, it put pressure on European countries, from Greece to Germany, to intervene more actively in solving the crisis by recapitalising their banks and letting the ECB buy the sovereign bonds of beleaguered countries. US Treasury Secretary Timothy Geithner travelled many times to Europe to express not only support but also concern – not least because Barack Obama’s chances of re-election in 2012 were threatened by a possible deepening of the euro crisis.