No longer in a state of denial, the Europeans have painfully acknowledged the arrival of the banking crisis to their shores. Acting in concert with the Federal Reserve Bank and the Bank of England, the European Central Bank announced an emergency interest rate cut to ease the intensifying global financial crisis.
More important, eurozone governments, taking the lead from the UK, coordinated in a massive rescue operation this past weekend. One should not assume, however, that their eleventh-hour intervention heralds more coordination among European capitals or closer transatlantic cooperation.
European leaders initially spurned rescue operations, leave aside coordination, for what they dismissed as an American problem induced by greed and a messianic commitment to the free market. German Finance Minister Pier Steinbruck, in a transparent display of schadenfreude, opined that the United States was on the verge of losing its status as the world’s financial superpower. But as Europe’s banking woes mounted, governments recognized that they could not escape the enormity of the storm on the other side of the Atlantic.
Although the United States may be a declining power, its decline is not likely to bring cheer to the Old World because it will force Europeans to assume a larger role in maintaining a stable international order. Last Sunday’s historic agreement and the earlier coordination of the world’s key central banks aside, it is far from clear that they are prepared for the task.
European leaders agreed to the massive rescue plan, which may amount to $2 trillion, to save their economies from collapse. It remains to be seen whether they will sustain their cooperation through a prolonged recession, which is expected. Only a week earlier, the same group that gathered at the request of French Prime Minister Nicholas Sarkozy was content to deal with their countries’ problems independently rather than collectively. Worse, Chancellor Angela Merkel, following the Irish example, promised to guarantee all retail deposits in German banks. This beggar-thy-neighbor attitude, which several smaller countries also embraced, could undermine the common European consciousness that has incipiently emerged and impede future cooperation with the United States in restoring the health of international financial markets.
The financial turmoil also is likely to undermine US-European security cooperation. Secretary of Defense Robert Gates has made several appeals to the European allies to expand their troop commitments to Afghanistan. Preoccupied with the global financial crisis, however, the European allies are neither likely to increase significantly their military presence nor defray the cost of additional peacekeepers provided by other states. The spiraling deterioration of conditions in Afghanistan is a further impediment. Much to Washington’s dismay, the British government has agreed with senior commanders in Afghanistan that the Taliban can not be defeated. Countries such as Germany that have agreed to augment their forces have deployed them outside of areas where intense combat is occurring.
Europe’s divided response to the Russian military intervention in Georgia is another discordant note in the transatlantic security dialogue. Russia’s former satrapies, so-called “new Europe,” supported by the UK, endorse Washington’s policy of NATO membership for Georgia and Ukraine. “Old Europe,” principally France, Italy, and Germany, on the other hand, are loath to antagonize Moscow by expanding NATO’s borders lest their actions deprive them of access to Russian oil and gas. The hapless war in Afghanistan and the revival of Russian power will almost certainly lead to recriminations on both sides of the Atlantic.
The return of Russia to the international stage, coupled with the end of unipolarity, the rise of Asia, and the fragility of the international banking system in an era of globalization presents Europe with an opportunity to exercise leadership. By meeting the challenge, the European states can both intensify and accelerate the process of integration they began with the Single Act in 1986. Assuming greater responsibility for the management of their economic and security affairs is also likely to lead to a more equal partnership with the United States.
On the other hand, the European states may be politically immobilized by the shifting international trends and, as they did during the break-up of Yugoslavia in the early 1990s, abdicate their responsibility to help maintain a stable order. In the end, the impending global recession may induce the Europeans to take the easy way out and rely on the United States to restore global financial and security stability. Charting a more independent course would, among other things, require financially strapped welfare states to assume the burden of their own defense. Never cheap in the best of times, it would be economically prohibitive now. Besides, having clung to the coattails of the American hegemon long after the end of the Cold War, the Europeans may psychologically no longer be capable of standing on their own feet.
Hugh De Santis is a former career officer in the Department of State and chair of the department of national security strategy at the National War College. He is currently a consultant to the government and private sector on strategic planning and international affairs. The opinions expressed do not reflect the views of any government agency.