European Institute

Beneath the mantra about a coordinated global response to the economic crisis, a line of fracture starkly divides the two sides of the Atlantic about what to do in practice to revive the sinking economies. In Washington, the Obama administration is accepting an unprecedented amount of government debt in order to pump money into the hands of consumers who can spend it and revive business. An Obama aide says that Canada, France, Germany and Brazil are not matching the U.S. effort with stimulus spending of their own and should do more. No, answer Ms. Merkel and Mr. Sarkozy – firmly but politely, so far – this is the wrong approach, the wrong priority. The global financial rules need to be overhauled before more money is pumped into it, they say, because the real problem is the lack of confidence in a recent U.S. model of capitalism that has collapsed. And, they say privately, America is to blame for the problem, so America should pay to fix it.

The inauguration of Barack Obama has been greeted by seemingly universal words of welcome and great expectations. German Chancellor Angela Merkel called it “a special day for billions of people all over the world” while French President Nicolas Sarkozy announced “we are eager for him to get to work so that with him we can change the world.” In most quarters of the globe, there appears to be a common belief that President Obama will preside over an American government that is ready, willing and able to engage the rest of the world and re-assert its leadership on the most important issues facing the world today and in years to come. Unilateral actions are out, we are told, and multi-lateral cooperation is back on the table.