Last week, the Slovakian parliament voted in favor of a bill that grants more powers to the European Financial Stability Facility, the fund largely responsible for mitigating the European debt crisis. The vote reversed a decision from two days earlier that made Slovakia the only euro-based economy to reject the bill. From my view from across the pond, watching Slovakia’s 180-degree turn on a bailout vote reinforced my belief that Europe is capable of doing something that the United States struggles with: tackling hard problems in the face of difficult economic circumstances. The fact that the EU is more capable than the U.S. of implementing aggressive policy solutions is a reflection of key differences in the current political climate between the two entities.
Two factors direct the response to the euro zone crisis. First is a feeling of urgency that something must be done immediately to resolve an impending crisis. Second is the political ability to engage in action to resolve the crisis. This political will is especially impressive given the significant institutional problems facing the EU. The EU must balance multiple governments, different national goals, a myriad of domestic pressures, and a mix of conservative and liberal governments. Yet, somehow, the EU is able to make the tough decisions necessary to battle economic collapse.
The reason is one of political climate.
The EU moves forward with a common belief system that allows them to resolve difficult issues. The EU sees a debt crisis, bank failure, and risk, and responds appropriately because it has no other option in order to help the euro stay afloat. German Chancellor Angela Merkel has come out strongly in favor of maintaining the euro and strengthening the EU, even if it requires amending EU treaties. Even top business leaders such as Siemens CEO Peter Loescher have come out publicly in favor of saving the euro, stating “The European economy needs the euro. It is a hugely important stabilizing factor for Europe’s economic development." Markets have responded favorable to recent political efforts as the euro hit a two-month high last week.
On the other hand, the U.S. remains trapped by debilitating partisanship rooted not just in politics but in basic values. Our politicians share no commonality or overarching purpose. On the right — the Tea Party and the Republicans who indulge them — is anti-science, anti-government, and anti-tax. Liberals want to tackle climate change, maintain social safety nets, and restructure the tax system to increase the burden on the wealthy. The far right would rather shut down the government than have the government participate in a solution. There is no room for compromise in the current partisan environment.
Congress could use a Slovakia moment. The Slovak deal exchanged approval of the European bailout effort for early parliamentary elections. Many Slovaks are angered by this agreement, but compromise is neither easy nor free of costs. The deal allows Europe to continue moving forward in its effort to stop the European economic problems before they get worse.
I am not promising that the euro zone will be able to resolve its debt crisis or maintain the European currency. There is much work to do, and some commentators are already discussing the possibility of a Japanese-style lost decade resulting from a $7 trillion lending contraction. But a failure of policy will not be for lack of trying hard, making tough choices, and working together like adults.
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