International Affairs Forum:
You are a member of the Board of the American Consortium on European Union Studies in Washington. How do you view the prospects for political and diplomatic relations between the EU and the U.S., given political changes in the EU and the Obama administration?
Prof. Stephen Silvia:
Everyone is trying to figure out what the new relationship will be. It is clear that there is much closer affinity in terms of values between many of the European countries and Barack Obama. The relationship between the United States and Europe during the Bush administration was often dysfunctional. It was easier for Europeans to dismiss Bush decisions, as he was so unpopular in Europe. In contrast, the tremendous popularity of Barack Obama among Europeans makes it harder for European leaders to ignore requests from the United States. The U.S. is interested in a greater role for Europe to help it deal with problems, such as the Middle East and South Asia.
Some Europeans governments have begun to respond, even in advance. Last year, the French sent more troops to Afghanistan. Just this week, the Germans announced that they would send a small number of additional troops to Afghanistan for a temporary period. The Europeans hope is that this will be enough. Obama’s administration is likely to ask for a larger commitment of Europe, however. Another big issue between Europe and the United States is the financial crisis, and how to deal with it. The discussion shall focus on how and at what level to strengthen the regulation of financial institutions? The G20 conference last December was primarily the product of pressure from Nicolas Sarkozy. It was ill-timed, because it came in the waning days of the Bush Administration. So, the meeting accomplished little.
The upcoming G20 conference in London on April 1 and 2 will be different. The British have a clear set of positions that they have already begun to push, including the creation of an international “college of supervisors” to “name and shame” countries with inadequate bank regulations. The Germans and the French want a much tighter framework for regulating hedge funds. The Obama administration has not really expressed a coherent position on the opinion on the international regulation of financial institutions. Administration officials have been far too occupied with domestic issues, in particular, the U.S. stimulus package, a mortgage-relief bill and Obama’s first budget. It will be interesting to see the position the Obama Administration takes in the lead-up to the G20 conference and the extent to which it differs from that of the Bush Administration.
How have you seen diplomatic relations between the U.S. and the EU evolve since the beginning of your research?
The old, comfortable relationship that existed during Cold War is gone. At that time, there was much more consensus among leaders in the United States and Europe. The U.S. would play the “bad cop,” ritually cajoling the Europeans to do more in the Cold War effort. European leaders largely agreed with the U.S. position, but needed U.S. pressure to bring along an at times reluctant European public.
During the Clinton administration, we saw a different form of relationship, which was largely the product of a considerable degree of insecurity on the part of Europeans. Bill Clinton at the start of his administration made openings to Asia and talked about how the next century would be an Asian one. The Asian-Pacific Economic Cooperation came into prominence during this time. So, there was a lot of anxiety in Europe that the United States was losing its interest in Europe. However, in the later years of the Clinton administration, problems arose -- in particular, the collapse of the former Yugoslavia -- that made the United States focus more on Europe again.
The end of the Cold War has had two contradictory effects on the U.S.-European relationship. On one hand, it liberated the U.S. from its “bad cop” role and led the U.S. policy-makers to hope that Europe could serve as a more equal partner. On the other hand, Europe reacted to the end of the Cold War by cutting back on defense expenditures. As a result, Europe became less capable as a security partner in the world. During the last twenty years, the United States has invested heavily in military hardware and technology. The innovations have been substantial. The U.S. has developed whole generations of “smart war” technologies, but the Europeans have not kept up. This gap makes it difficult for the U.S. to work with the Europeans as equals on the battlefront. The irony is that there was an opportunity for Europe to play a more equal role on the international scene, but the resources to do so are not there.
Europe’s institutional architecture is also not up to the job of playing the role as an equal partner to the US. Six years ago, Colin Powell said that he was hopeful that the European Union would reform its institutions because he was tired of having “one-on-one” meetings with the Europeans that always included at least three people on the European side: the Director General for External Relations from the European Commission, the High Representative for the Common Foreign and Security Policy and the foreign minister of the country with the EU presidency. This reminded him of the old question that Henry Kissinger asked about whom to call when he wanted to speak to someone in Europe.
If we look at the Bush administration, their attitude towards Europe was best expressed by Donald Rumsfeld’s famous distinction between, “Old Europe” and “New Europe.” Ultimately, the divisive and excessively personalized relationship between the Bush administration and European leaders proved to be both divisive and detrimental. For example, when José Zapatero became the prime minister of Spain the close relationship between Spain and the U.S. based on personal ties between the previous prime minister, José Aznar, and George W. Bush evaporated. The Bush administration was never able to repair fully its strained relations with France and Germany even after Jacques Chirac and Gerhard Schröder left office.
It is not yet clear how Obama will differ. Obama stands out as an American president, in terms of the lack of experience he has with Europe. He has almost none. Still, I am hopeful that a more stable relationship can be found. Hillary Clinton should be a good partner for Europe, given her skills, experience interacting with world leaders and the fond memories of her husband there. Obama describes himself as a problem-solver who is post-ideological. He is likely to think of Europe in instrumental terms; how can Europe help to solve his problems, such as bringing peace and stability to Iraq and Afghanistan, and sorting out the global economy? It is important not to forget that emergencies, crisis situations can happen. The most recent dramatic one remains 9/11. These can fundamentally alter the US-European relationship.
To what extent can a strong economic and financial partnership between Europe and the United States help the current economic crisis to be solved? What kinds of measures have been, or should be taken on both sides to improve the situation?
The financial crisis is going to be very difficult to resolve. We wonder whether the stimulus package will work; if it is big enough, or too big. Europe and the United States need to come together regarding the question of financial regulation, but this is going to be difficult. Europeans tend to push towards strict regulation, while the Anglo-Saxon countries are more interested in preserving a more laissez-faire approach. Both sides will need to work hard work to try to improve upon the Basel II pact for bank regulation. Basel II did absolutely nothing to address a systemic crisis, it was conceived for helping individual banks distribute risk. Whether there is a Basel III or not, it is clear that we are in a desperate need of an expansion of international bank regulation to avert systemic crises. Another question that will come up is coordinating fiscal policies: the Germans have been very hesitant to engage in a strong fiscal stimulus.
Tensions are also high within Europe over state subsidies. France has been aggressive in proposing state subsidization, as has the United States, but the Germans have been far more reluctant. The U.S. would also like to see the European Central Bank take a more expansionary stand than it has. Trying to coordinate all this will be very hard. There are fundamental disagreements about who should do what. However, today, we are more likely to see interchange between Europeans and Americans on these questions. The willingness to engage is definitely there because the crisis is so large, but we still have the problem of the European institutions for being inadequate for a close coordination. The Kissinger question is also valid regarding economic policy.
Do U.S. officials talk to the Director General of Economic and Financial Affairs, the president of the euro-group, the head of the European Central Bank or the finance minister of the country with the EU presidency? It is hard to have top-level intense exchanges given dispersal of responsibility within the EU.
Do you think some things in the U.S. stimulus package could have some negative effects on U.S./EU economic and commercial relations? Some have suggested an “American protectionism” toward the EU. Do you agree with that?
I think that episode that just unfolded regarding the protectionist language in the stimulus bill is a familiar one that has been repeated many times. The Congress makes protectionist noises, but protectionism is ultimately averted. Even in the fifties, that happened. The addition that the Senate made to the “buy American clause,” which restricted actions within existing the United States trade obligations, defanged it.
What effects did the enlargement of Europe in 2004 and 2007 have on the economic situation in Europe?
The problems that Europe has to confront are more complex, because of the much more fragile economies in Eastern Europe. One has to be concerned about the state of these economies; They have modest standards of living and a limited ability to absorb shocks. Until the last week or so, all the attention has focused on the larger, more affluent economies of Western Europe, where the problem has been great and the impact on the global economy is the largest. Nonetheless, the problem has been greater in percentage terms if not absolute size in Ireland, Spain, Hungary and the Baltic states. Economic implosions in central and eastern Europe would have devastating effects on not only the European economies, but also political stability.
What kinds of consequences of the global financial crisis have to be expected for Eastern Europe countries?
They will be affected, as those countries have increasingly become dependent on Western Europe and its markets. Furthermore, you could see private investments less willing to invest in eastern and central Europe, places “with more risks.” American companies, who face the economic downturn, have already begun to cut back.
Dr. Stephen J. Silvia is a professor at American University, Director of Doctoral Studies at the School of International Service, and a Board Member of the American Consortium on EU Studies.
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