The ongoing eurozone crisis is a major factor in the slow pace of U.S. economic recovery, say some analysts, and continued economic problems in Europe could spell problems for President Barack Obama in his bid for reelection.
The global economy is in the worst shape it has been since 2009, according to an Associated Press report. Financial markets have been volatile this week and the euro dipped to a two-year low amid talk of the possibility of additional bailouts beyond the banking system in Spain (WashPost) and Greece struggles to meet the terms of its bailout deal (Reuters).
“The quick reaction in the markets indicates Europe will continue to be dead weight on the U.S. recovery and a problem for Obama, whose bid for a second term could hinge on how voters feel about the economy,” writes Peter Schroeder at The Hill. “The political strife fueling Europe’s debt crisis is showing few signs of abating, with most expecting it to remain a dark cloud over financial markets at least through the November election, if not longer.”
U.S. Treasury Secretary Timothy Geithner is making the rounds (WSJ) on talk shows and in Congress this week, saying Obama administration and European officials have been working together behind the scenes and that he believes the eurozone will survive intact (Reuters).
GOP presidential candidate Mitt Romney — whose campaign has been critical of President Obama’s actions during the European crisis — is avoiding the eurozone on his trip abroad this week, notes Josh Boak at The Fiscal Times.
“In some ways it’s wise for Romney to skip venturing deep into the crisis since he has little chance to influence economic policy in Europe,” Boak writes. “But those following the sovereign debt crisis wondered why he didn’t try to squeeze in a visit to Germany, the eurozone country with the resources to engineer bailouts for Greece, Italy, and Spain.”
For more on the candidates’ stances, check this issue tracker on The Candidates and the Economy.
Suggested Other Reading:
Brookings fellow Domenico Lombardi, in an interview with CFR.org, says that a proposed centralized banking supervisor could help stabilize Europe’s struggling banks and increase vital capital flows within the euro area and be a a first step toward developing a eurozone banking union.
The Washington Post’s Brad Plumer breaks down Spain’s bond yield roller coaster and what it means for the world’s markets.
— Gayle S. Putrich, Contributing Editor