As Americans fixate on the battle for the Republican presidential nomination and the continuing travails of the U.S. economy, the real story in financial land is what is happening in Europe. The issues aren’t new: concerns over the contagion of a default of Greek debt, or Irish or Portuguese or Italian, have been percolating for more than a year and a half. But there is a definite sense of late that these issues are potentially spinning out of control.
Having weathered the debt crisis and an August market sell-off and an absurd downgrade by Standard & Poor’s, the United States is now in danger of being sunk not by its own dithering economy but by the inability of the Europeans to manage their crisis. In that sense, America and Europe have almost completely switched places since this time exactly three years ago when the collapse of Lehman triggered what we now know was a near global financial collapse.
It’s a frustrating and frankly alarming position—to be at the whim of the decisions of others. And it is an unfamiliar one for the current generations of American who have known only one reality of America the colossus. It is we who have determined our economic fate and that of the planet—until now.
Americans have already come to the uncomfortable awareness of interdependence with China, which both supports and constrains the U.S. economy and both challenges and liberates U.S. companies. But the challenge of Europe is to accept a connection to a millstone that has the financial world teetering.