Europe’s economic crisis was, in many ways, worse than the Great Recession the United States faced. This sample essay questions whether or not the U.S. should have given Europe economic assistance during the 2008 financial meltdown.
Should the U.S. intervene in Europe’s economic crisis?
Background on the European financial crisis
The beginning of the European debt crisis came from Greece’s expanding debt in 2009. The country had failed to make the necessary financial policy reforms that would aid the slowly growing economy after the United States debt crisis of 2008-2009. When this problem was left unchecked, the Prime Minister of Greece, George Papandreou, was forced to publically admit that the country’s debt was so large that it exceeded the entire economy of the nation.
This prompted investors to demand a higher yield on the bonds that Greece owed, which raised the nation’s debt burden so high that it required a series of bailouts from the European Union and the European Central Bank. Since this began in 2009, more and more countries of Europe are experiencing financial troubles and are appealing to the EU for aid (Kenny).
The problem with seeking aid from the European Union for a struggling nation is that it a multinational conglomerate. The EU moves relatively slowly on such matters because it is made up of 17 different nations that all must agree on an issue before action must be taken. In this situation, action needed to be taken very quickly. Since spring of 2010, the EU has attempted to make progress on the issue.
They have distributed over $300 billion of bailout money to help the struggling economy of Greece; however, more and more nations are finding themselves in economic hard times. The nations of Ireland and Portugal both received bailout money from the EU. Additionally, nations such as Spain and Italy are finding themselves in places where a struggling economy is a real threat. The European economic crisis is an issue that is truly being felt through the greater part of Western Europe (Kenny).
What's at stake for Europe?
Economic: The European economic crisis is of great concern to the United States own economic recovery. The U.S. has strong economic ties to Europe, and a devastated economy can seriously affect our nation. The economic turmoil in Europe can negatively affect the U.S. stock market. Additionally, the falling value of the euro could very well cause the trade deficit between the U.S. and the EU to widen. A final economic concern the U.S. has with this issue is that the Treasury Department yields have fallen because of the uncertainty that currently surrounds future of the European economies (Nelson et al. own ).
Political: The president must balance the efforts between reelection and dealing with foreign issues such as the failing European economies. Because the economic state within our nation is such a key issue for the upcoming election, the president would be wise not to let this issue go unchecked. If we can show that our involvement can help to stop the spiraling effect and help maintain an economic recovery act within the EU, then the domestic policies that are pushed for in the U.S. will gain more support.
Militarily: The nations of Europe have long been our allies in addressing many different global issues. There have been some ideas that the current European economic challenges may turn the efforts of the EU into more internal issues. This could cause a downward tendency in Europe’s defense spending. This is significant to the U.S. because the nations of Europe have been some of our closest allies in military issues. If these same supporters are not able to aid in any potential future defense situations, the cost of said situations becomes a greater burden on the United States. One of the strengths of many of our coalitions has always been that they are made of many different countries all supporting each other in difficult situations (Kenny).
Other options to avoid crisis
- Option I Do not get involved: The United States has its economic difficulties to deal with in this time. We do not have the financial resources to repair our damage economy and that of the continent of Europe, so we should only fix what we realistically could. By taking this option, however, we may very well hurt our economic recovery by letting one of our largest trade partner’s collapse economically.
- Option II Take complete control of recovery: The United States has time and again come to the aid of Europe when they are in need; now is such a time again. By asserting our authority over the struggling and slow-moving EU, the U.S. can implement more efficient economic recovery strategies. This method would put us in an almost dictatorial position of power however and would cost huge amounts of resources.
- Option III Contribute some help where we can: The United States has vested interest within Europe’s nations’ economies. We cannot let them collapse, as that would be a loss of many sources of trade to our nation. One such solution to a limited amount of aid we can provide is to contribute additional funds to the International Monetary Fund (IMF). Unfortunately, with our trouble economy, it is increasingly difficult to find new sources of funds to contribute (Nelson et al.).
Possible recommendations
- Option III Contribute some help where we can: The United States has vested interest in the economic future of the nations of Europe. We cannot let their economies go under. Though we are in our economic hard times, we can find ways to contribute still. By giving more funds to the IMF as some other countries have done already, we can help guarantee that it has the ability to continue running and distributing funds to those in economic hard times. By contributing resources, we also can retain a position where we have some oversight of the events that continue to unfold (Nelson et al.).
Works Cited
Kenny, Thomas. "What is the European Debt Crisis?." About.com . 2012: n. page. Web. 31 Oct. 2012. <http://bonds.about.com/od/advancedbonds/a/What-Is-The-European-Debt-Crisis.htm>.
Nelson, Rebecca, Paul Belkin, Derek Mix, and Martin Weiss. United States Government. Congressional Research Service. Eurozone Crisis: Overview and Issues for Congress. 2012. Web. <http://www.fas.org/sgp/crs/row/R42377.pdf>.