Op-Ed: In view of the global consequences of even a temporary U.S. default, American politicians are being astonishingly irresponsible. That they have lectured Europe on economics is laughable.
BERLIN – In recent months, U.S. President Barrack Obama has repeatedly called German Chancellor Angela Merkel and other European leaders to talk economics. Obama applied so much pressure that many felt that it was tantamount to interfering in these countries' internal affairs. Why all the pressure? To bring it home to the Europeans that, no matter how much it cost, they had to solve their debt crisis. If they didn't, capital markets -- and the US economy -- would be severely damaged.
But now that the euro zone has at least temporarily solved its problem by throwing billions of euros at it, investors are still jittery. And the reason for their jitters this time isn't Europe. It's the USA, in what looks to Europeans like surreal squabbling over budget policy.
For some time now, observers around the world have been expecting the Americans to get over the bickering, raise the debt ceiling and move on. That has always been the case in the past, and so assumptions were that reasonable members of both parties would prevail this time too. But after every meeting, the impression grows that irresponsible hardliners on both sides have taken their parties hostage. And America with them.
The conflict, of course, is about a lot more than different approaches to budget policy. For some Republicans, this isn't just about making sure there are no new tax hikes. They also don't care that a large part of Obama's financial woes were caused by his Republican predecessor, George W. Bush. What they do care about is damaging the president. Even the good of the economy doesn't appear to be a price too high to pay. The Democrats' overbearing attitude, on the other hand, is no help, making it difficult for moderates in both parties to agree on some form of compromise. It's a dangerous mix.
If things stay this way, the world faces catastrophe. Already, the big U.S. money market funds, fearing a liquidity crisis, are hoarding cash in the event of the worst case scenario: America's inability to pay its bills. That cuts European banks off from access to significant financing options. The same thing played out when Lehman Brothers went bust, and everybody knows what happened next.
One can only hope that the influential members of both US political camps can manage to reach agreement -- and convince their party members to go along with it -- before the August 2 deadline. The consequences of a US default would be nothing short of disastrous. But with an eye to coming elections, partisan antics seem to be winning the day in Washington.
Read the original article in German