The conquering of the euro crisis seems like something out of a fairy tale. Faced with a gut-wrenching peril, our hero closes his eyes and chants an incantation: "Whatever it takes!" Suddenly, once-insurmountable troubles melt away and everyone lives happily ever after.
So what happened? Was it all in our minds? Was the episode anything more than a panicked bunch of bond traders, stampeding toward a precipice but now safely pacified and redirected?
As last summer turned into fall, Italy and Spain were wobbling. The two countries -- the third and fourth largest economies in the eurozone -- saw their bonds shunned by global investors. For the heavily indebted pair, a bond sell-off meant that interest rates rose and disaster loomed. At some point, the high price of borrowing would become unbearable. The eurozone nations had gathered funds to try to avert a crisis, but the sum would not be enough to cover the needs of such large member economies.
Then Mario Draghi, head of the European Central Bank, stepped in to save the day. He announced that the ECB would do whatever it took to save the currency. If extra funds were needed, the ECB would provide them through a program it called Outright Monetary Transactions -- the unlimited purchase of troubled nation bonds once those countries asked for help.
The effect of his announcement was dramatic. Bond yields fell as buyers relaxed. While the previous bailout fund might have been limited, the ECB's ability to print money and buy bonds was not. The restoration of calm was so successful that the ECB did not have to actually do a thing -- the mere announcement that it was willing to act relieved the pressure on Spanish and Italian borrowing.
It is hardly a novel idea to think that a dangerous market panic could be settled by words alone, so long as those words were credible and uttered by the right person. So, do we mark this up as an instance of judicious intervention? A daring move by Mario Draghi that saved the European project and merited his selection as the Financial Times' Person of the Year?
Maybe. The problem is that the sovereign debt problems plaguing Spain and Italy were only one part of a multi-dimensional crisis. The other problems remain, two in particular. First, the untenable contradictions of the eurozone's approach to banking have not been resolved. Second, the beleaguered countries along the eurozone's periphery are being asked to endure potentially unbearable levels of unemployment and economic stagnation.
The banking problem can seem the most obscure part of the problem. Yet as the global financial crisis demonstrated, the provision of credit is the lifeblood of an economy. Cut off credit and economic asphyxiation sets in quickly. Europe's additional discovery was that, in a single currency zone, money could flow very rapidly from any bank perceived as risky to others perceived as safe. Any hint that a bank's host country might leave the euro or that the bank might have gorged itself on dubious sovereign debt would be enough to start the exodus of funds. No funds, no credit, no economic activity.
Eurozone leaders resolved to fix this with a banking union. And then they ran into politics. Banking regulation is sensitive. There was little appetite for ceding control. Last week, discussing a recent bilateral move by France and Germany to coordinate their banking policies, the Financial Times' Wolfgang Münchau wrote:
"My suspicion is that the ultimate intent of the Franco-German legislation is to secure the position of their national champion banks ... The most important signal sent by the unilateral legislation in France and Germany is the lack of political will to sort out the banking mess, which is at the heart of the eurozone crisis. Instead, governments are seeking refuge in symbolic gestures ... The renationalisation of banking means that the monetary union is as unsustainable today as it was in July last year -- and now the policies needed to fix this problem have been abandoned."
This was one danger of Draghi's move. By alleviating the sense of impending doom, he also may have undermined the impetus for overcoming entrenched opposition to reform.
The growth and unemployment situation is not much better. A story this week, contrasting positive Spanish sentiment with dismal performance, detailed the economic turmoil in the country:
"...in the last quarter of 2012 ... the number of companies declared bankrupt soared by almost 40 per cent to 2,584. It was the highest number since the crisis began, suggesting that the situation for credit-starved Spanish companies is not only getting worse -- but getting worse faster than before ... Nor has there been any sign of a turnround in Spain's dismal unemployment numbers, which continue to rise towards 6 million, or more than 26 per cent of the workforce ... The IMF expects a drop in GDP of 1.5 per cent this year -- a worse recession than in 2012."
We also come upon another danger of Draghi's move: By restoring confidence in the euro, he paved the way for the currency to rise, which did no favors for eurozone exporters. That's hardly the cause of Spanish economic woes, but it is no help, either.
And then, as always, the democracies of Europe have politics. Spain's governing party is caught up in a political scandal. Italy is moving back to electoral politics after a technocratic interlude. It is not clear that difficult political choices will get much easier in either case.
The list of eurozone perils is alarmingly long. Yet a remarkable sense of calm prevails in the markets. Perhaps this will be a crowd-pleasing story book ending, the sort in which impossible obstacles are overcome and everyone goes home happy. Or perhaps it will be the kind of story one rarely sees out of Hollywood, in which our blissful hero opens his eyes, only to find that he had dreamt his salvation and the threats remained, more menacing than before.
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We have a problem in Mali: an al Qaeda franchise has taken over most of the country. President Obama only two days ago recommitted the United States to "combat[ing] the scourge of terrorism in the region." An American ally has been working tirelessly to bring the United Nations forward, provide a political solution, organize countries in the region to provide troops, and take the lead in operations. It would seem a perfect illustration of the Obama Doctrine: U.N. mandate, regional buy-in, leadership by an American ally, the United States one contributor among many.
And oh, by the way, the military coup that overthrew a democratic government in Mali, setting off the instability that enabled al Qaeda to prey on the country? That coup was the work of military officers and units trained by the United States. The fighters mowing across the country in conjunction with al Qaeda are veterans of the war in Libya, armed with weapons looted there. They are part of the widespread insecurity that Libya's transition has spawned and U.S. policy has done nothing to attenuate. So we bear some culpability for the terror engulfing Mali. And it is in our security interest -- and in the interest of the administration's vision for the new international order -- to stamp it out.
And yet our ambassador to the United Nations publicly described the French plan as "crap," and delayed U.N. action for weeks. When France commenced military operations to prevent the al Qaeda franchise from overrunning Mali's capital, the Obama administration demanded payment for any military support provided. Ten days into the operation. U.S. officials haven't even decided whether to make requested air-to-air refueling sorties available for French planes. "This is a deliberate effort to consult with the French to assess how best we can support them in the context of support provided by other countries," said Pentagon spokesman George Little.
That's not leading, even from behind. That's undercutting your allies.
It's also incredibly damaging to the United States, even on the terms the Obama administration itself espouses. The White House wants our country to step back from unilateral actions, to have a share but not the lion's share of the work. That requires others to be both willing and able to step forward.
Our European allies have twice in the past couple of years shown themselves willing to lead military operations when we would not. In neither Libya nor Mali has the Obama administration denied that we have an interest in achieving the objectives for which our allies fought, and are fighting. So we agree it needs doing, we just don't want to do it.
Europe has several of the world's most capable militaries; not just Britain and France, but also Denmark, Norway, Poland, Sweden, the Netherlands, and others have all acquitted themselves admirably. But even those militaries lack outright or run short of some of the things that Americans take for granted in our operations: persistent surveillance of battlefields, reliable communications, rapid identification and targeting, the ability to strike promptly, transportation to deploy troops and equipment, precision-guided munitions to minimize unintended casualties, air-to-air refueling to enable strikes from great distances and repeated passes at targets.
That Europeans don't have these "enablers" in sufficient supply is their own fault. They chose to spend their money differently, predictably reducing military prowess and increasing the risk of failure. They mostly ignored decades of American pleading and NATO initiatives to boost defense spending, from the percentage rules of the Carter administration to the current incarnation of "smart defense." And they often spoke of their cultural superiority in spending money on social programs rather than militarism, even while they depended on our militarism. There is in some quarters a smug satisfaction about the Europeans finally realizing what we've been trying to tell them for so long.
But indulging that schadenfreude is unworthy of us. We want a world in which countries that share our values act to protect and promote those values; otherwise, the hard work all accrues to us. We want allies that see the right and take responsibility for acting to advance it.
Why not expect the Europeans to pay for what they need, especially when the United States borrows 30 cents of every dollar that our own government spends? The Obama administration isn't wrong to try and shift the burden-sharing toward Europeans. But there is a time for negotiating the terms of support to allies. That time is not when they are undertaking a military operation with goals that we support -- nor even when they are undertaking a military operation we don't think is a good idea.
Denying support in extremis leaves scars -- as Americans well know (Turkey denying us search-and-rescue operations from their territory during the Iraq war, France denying us their airspace during the El Dorado Canyon attacks on Libya, Belgium threatening to close its ports to us in 2003). Our own experience as an ally often in need of support even when governments oppose our policies ought to make us more, not less, willing to help when it counts most.
The French defense establishment had the grace to be embarrassed by their government's choices in 2003. The Obama Pentagon has not expressed similar embarrassment, either with regard to Mali or generally. It is from the Pentagon that the demand for reimbursement emanated. Nor is the fault confined to political civilians. Gen. Martin Dempsey has said the United States did not want to be complicit in any Israeli strike on Iran. If I were in Tehran, I would interpret that to mean we would deny Israel assistance. Denying France assistance now will reinforce the perception -- both among allies and enemies -- that U.S. allies are on their own.
The Obama Doctrine depends critically on others stepping forward and undertaking the work we are stepping back from. There will be fewer allies willing to do that if we continue to be stingy with our help and generous with our criticism
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President Obama is right to invite France's new president to the White House in the coming weeks for a series of exploratory talks. The Obama team will understandably put a positive spin on such a visit, but I bet the motivation is as much fear as opportunity. From the point of view of American foreign policy, I think Doyle McManus has it right: Obama is sure going to miss Sarkozy.
Sarkozy was the indispensable key figure in two of the more prominent policies that Obama officials tout as "successes." First, it was Sarkozy, not Obama, who led on Libya. Without Sarkozy (and British Prime Minister Cameron) pushing the agenda, it is likely that Obama's initial policy of refusing to intervene in Libya would have held. Obama joined the bandwagon somewhat belatedly, something that even White House spinners couldn't ignore, thus giving rise to the infamous "lead from behind" frame.
Likewise, it has been Sarkozy (and the U.S. Congress) more than the Obama administration out in front on using economic coercion to confront Iran's nuclear ambitions. Obama's innovative contribution to Iran policy was the unsuccessful attempt to hold unconditional talks with the Iranian leaders in 2009. However, with Sarkozy pushing hard from one end and the U.S. Congress pushing hard from the other end, eventually, after a year or so delay, the Obama administration did join in to impose tighter sanctions.
Thus, Sarkozy may well have been the indispensable figure in two of the more prominent talking points on Obama's brag sheet. If his French partner had been more of a spoiler in the mold of Sarkozy's predecessor, Jacques Chirac, is it plausible to think that President Obama would have intervened in Libya or secured new rounds of multilateral sanctions on Iran?
Finding out what kind of partner President Hollande will be is a high priority for President Obama. And finding that out may also tell us some important things about President Obama. To borrow a sports analogy that the president would doubtless understand, we may learn that Obama is not as good a point guard when the other guys on his team can't or won't run the fast break.
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Was the Libya mission a model for an Obama doctrine on the use of force or was it just a one-off pick-up game? It appears it may have been both.
After Qaddafi's fall, the White House was keen to tout the Libya operation as a perfect exemplar of how the Obama administration could wield U.S. power more effectively than previous administrations, something an advisor subsequently branded as a "lead from behind" approach. Even though Libya is still an unfinished project, if you talk to enough Obamaphiles as I do, sooner or later the Libya model will be touted again, especially the dramatic comparison of how low cost Libya was compared to Iraq.
It was low cost, at least for the United States, but as for a model, it may be a precedent for doing nothing in the future -- at least that is the impression one gets from the latest reporting on Syria. Apparently, the White House has told Syrian rebels that they are on their own, that the United States will not be assisting them further, and so Assad may be on track to accomplish what Qaddafi could not: kill enough of his own citizens fast enough to defeat the rebellion before outsiders can intervene to tip the balance in favor of the "right side of history."
In this, the Obama administration may be following the Libyan precedent to the letter. The problem with "leading from behind" is that it really means "following another leader." In the Libyan case, the real leaders were the Europeans, especially the French and British. They led, Obama followed, and Qaddafi fell.
On Syria, no one is leading, not yet anyway. Perhaps the cross-border violence will finally prod Turkey into leading and, if so, perhaps the "Libyan model" will lead the Obama administration into acting. But until then, the Libyan lesson may simply be this: When no one leads, no one follows, and when no one follows, the international community does not act.
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Although Britain and France have closely aligned interests, they have long found it difficult to cooperate. As Shakespeare once described the relationship: "France and England, whose very shores look pale with envy of each other's happiness." While NATO allies France vetoed Britain's application for the European Economic Community -- not just once but twice. But yesterday, British Prime Minister David Cameron and French President Nicolas Sarkozy signed a treaty that will bind their defense establishments tightly together for the coming fifty years.
The treaty commits the countries to cooperation in nuclear stockpile stewardship, development of a 10,000 troop expeditionary force, and sharing of aircraft carriers. The agreement will see Britain's second carrier capable of landing French (as well as American) fighters, and swapping crews. They will jointly purchase transport aircraft and develop UAVs and future attack submarines.
Cameron was at pains to emphasize the agreement's strengths in terms of Britain's ability to fight unilaterally, saying it will "increase not just our joint capacity, but crucially we increase our own individual sovereign capacity." Sarkozy reassured that France would not balk at participating in Britain's wars -- a crucial argument after the Falklands and Iraq wars.
France and Britain have fought mostly on the same side in their wars of the past century, they've been committed to the others defense through NATO since 1949, as well as have Europe's only nuclear arsenals and its most powerful conventional militaries. They also have political cultures in which the use of military force is still generally accepted as a central element of statecraft.
It has long made sense for Britain and France to cooperate more closely on defense issues. The Blair government took a major step forward with the St Malo agreements in the late 1990s; but France remaining outside the NATO integrated military command since 1967 created both practical difficulties and suspicion in the United States about European cooperation.
France has been warming to NATO for nearly a decade, acknowledging advances other militaries were making as the result of close cooperation with U.S. military transformation. France returned to NATO military staffs last year, removing major obstacles to the kind of relationship Britain has been seeking.
Both countries showed unexpected compromise. Britain has accepted in defense the "two speed Europe" it fought so stridently against in EU councils. France was ambitious for an EU defense in ways that have not materialized; the agreement with Britain can be seen as both countries conceding the EU is incapable of providing the basis for closer practical cooperation. The United States should understand it also as a vote of no confidence that NATO can provide that basis (although the Cameron government would surely deny that, given how much rhetoric about NATO the defense review contains).
The Cameron government managed this all very shrewdly, rolling out their national security strategy, then their defense review, then their budget, and only then signing the U.K.-France treaty. Different sequencing would have increased the outcry in Britain that the budget cuts were damaging to Britain's security. Setting the context as they did, the optics are good European politics (a novelty for a Tory government), good transatlantic politics, and innovative ways to keep costs down.
When Great Britain and France were melding their militaries together to fight The Great War (as World War I was called before there was World War II), the Allied Supreme Commander, French Marshal Foch, worriedly asked his British counterpart, Field Marshal Sir Douglas Haig, how many casualties it would take before Britain were fully committed to winning the war. Haig imperiously answered "it would take but the death of a single British soldier," to which Foch irritatedly replied, "then assign him to my staff and I'll shoot him myself the first day of the war." With the new Cameron-Sarkozy agreements, the French may finally have their casualty.
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By Will Inboden
If one year ago on Election Day someone would have told me that the same President Obama whose campaign promised to repair America's global image would spend his first year in office visibly rejecting human rights and democracy promotion, I would not have believed it. Though I and many others have commented on this previously, it still ranks as the biggest surprise (and biggest disappointment) of his foreign policy thus far. Especially since America's historic commitment to human rights and democracy promotion has been one of its greatest soft power assets and sources of global goodwill.
One thing worthy of praise is the administration's emerging Africa policy. President Obama's speech in Ghana was an admirable call for improved governance, reduced corruption, growth through enterprise, and African responsibility for Africa's future -- and it could not have been delivered by a more effective messenger.
One growing worry is the Obama administration's shaky relations with the Great Powers which -- whether from poor personal chemistry or divergent interests -- could significantly hinder U.S. leverage going forward on several fronts. U.S.-Japan relations are near their worst in a generation (though the Obama administration was dealt a tough hand with the DPJ's election victory). The chill between Sarkozy and Obama is also hurting U.S. relations with France. Russia has thus far offered no significant reciprocal gestures for the U.S. capitulation on missile defense. Obama enjoys little chemistry with Gordon Brown (though to be fair, few leaders do) and has signaled indifference towards the U.S.-UK Special Relationship. U.S.-Germany ties are strong but will soon be tested by Germany's economic relationship with Iran. The Obama administration's China policy is too focused on financing U.S. debt while not pressing China to play a more constructive role on North Korea and Iran's nuclear weapons programs. And while the administration is atoning for its early neglect of India by hosting Prime Minister Singh soon for a state visit, the U.S.-India relationship will need consistent and high level attention in order to reach its potential -- attention that it is not clear the White House will maintain, especially if doing so incurs China's displeasure.
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Shadow Government is a blog about U.S. foreign policy under the Obama administration, written by experienced policy makers from the loyal opposition and curated by Peter D. Feaver and William Inboden.