The easing of the sovereign debt phase of the euro crisis has reduced tensions with the US, although differences remain on Germany’s macroeconomic policy.
The euro crisis made for a difficult few years of transatlantic economic diplomacy between 2009 and 2012. Americans worried that the eurozone posed the greatest threat to global economic recovery and disagreed with the EU and ECB’s focus on austerity and a tight monetary policy. Meanwhile, European officials generally believed that the US was largely responsible for the crisis and failed to grasp the nature of the euro’s problems and the rationale behind the EU’s response. They urged Washington to put its own house in order before lecturing others.
This tension eased somewhat in 2013 following ECB President Mario Draghi’s declaration in August 2012 to do “whatever it takes” to save the euro and the OMT programme that followed. This dramatically reduced the sovereign debt pressures on troubled members of the eurozone periphery. While the fundamental causes of the euro crisis had not been fully dealt with, one of its most visible manifestations had been, at least temporarily. Americans, and some Europeans, worried that the crisis had just entered a new phase – a protracted economic stagnation – but the respite led to an improvement in transatlantic economic relations, which helped pave the way for the launch of TTIP.
Differences remained between the US and Germany on macroeconomic policy. In April 2013, while visiting Germany for the first time as Treasury Secretary, Jack Lew publicly called for Germany to rebalance its economy towards consumption. In a report in October 2013, the US Treasury officially criticised both Germany and China for running a large current account surplus. Germany rejected the criticism and made its irritation with the US clear. The new German coalition government is focused both on the current account and on investment but will entail no new borrowing. Tensions could ease if it leads to a rebalancing but serious concerns remain about whether the new spending is properly directed and will be sufficient.