Pan Europeanism's Gambit

It would appear that a group of key European leaders combating the EU financial crisis have coalesced around the banner of Pan Europeanism.  Mario Draghi, head of the European Central Bank, has positioned the ECB to start financing struggling EU governments.  This is a paradigm shift from past ECB policies, and moves the ECB toward the money printing mode of the Federal Reserve and the Bank of England.  Recently, Angela Merkel, Germany's Chancellor, has spoken of cutting Greece a break on its austerity obligations under the terms of the EU's bailout for that nation. Such magnanimity is at rather sharp odds with her tough stated positions not many months ago.  The recent election in France of Socialist Francois Hollande shifted the EU's political center of gravity toward more accommodative measures--Hollande's notion of austerity is to raise taxes on the wealthy and give them a taste of austerity. 

The award of the Nobel Peace Prize to the European Union may be the latest move in the gambit to persuade skeptical northern European taxpayers of the need to keep the EU together.  The point is that failure to stay together will raise the specter of another continental war.  Although actual war seems highly unlikely in today's non- and often anti-militaristic Europe, the subliminal message is clear. 

The Nobel award is like a mutual admiration society of Pan Europeanists high fiving each other. The political in-crowd on the continent has to be very pleased with itself at the moment.  But the baseline problem for saving the EU remains whether or not northern European taxpayers are prepared to foot the bill for keeping the whole shebang together.  If not, the $1.5 million or so that comes with a Nobel Prize won't matter.  An interesting question is who will the EU select as its representative to receive the award.  Here's betting it's Angela Merkel, who needs political cover.

Why Obama's Nobel is Good for America

Despite vast right wing criticism, Barack Obama's Nobel Peace Prize is good for America. The award of the prize recognizes that, notwithstanding its banking debacle, economic distress, foreign policy morass in the Middle East, and debtor-in-chief status to the rest of the world, America remains the most important nation on Earth and must be dealt with.

The Nobel Committee clearly intends to influence the Obama Administration's policies. Its statement announcing the award noted that "Obama has as President created a new climate in international politics. Multilateral diplomacy has regained a central position . . . " The committee cares about whether America is going unilateral or multilateral because whatever America does has an outsized impact everywhere else.

The prize is part of the dialogue the rest of the world is trying to have with America. The European side of the dialogue can, from the American viewpoint, be irritating. When attacked, Americans are inclined to stand and fight. It's part of our tradition, beginning on April 19, 1775 and continuing through December 7, 1941 to September 11, 2001. Many Europeans seem wobbly by comparison. One must remember, though, that recent history remains much starker in their memories than ours. During the first half of the 20th Century, Europe fought two world wars, which were really just one long war. More than 50 million people in Europe died in these two wars (and perhaps another 30 million in Asia). A combined total of around 520,000 Americans died in the two world wars. For every American death, 100 Europeans died. With this in mind, it's easier to understand why Europeans prefer multilateral discussion to the delivery of firepower.

Like it or not, America needs the rest of the world. With massive deficits that the Federal Reserve cannot finance indefinitely, the United States will remain dependent on foreign creditors far into the future. The dollar's long term decline, which cannot be stopped at this point, must be carefully managed by all major economic powers, lest an abrupt drop push the world economy back into crisis.

Foreign cooperation will be crucial as financial regulatory reform progresses. Potential regulatory arbitrage by banks among American governmental agencies could be trivial compared to potential regulatory arbitrage by banks among different nations. It's no accident that Swiss banks became renowned for secrecy--Swiss law provided for it, and banks there exploited this regulatory regime to their commercial advantage.

Addressing environmental pollution and global warming by definition require multilateral effort. So does combating nuclear proliferation. Preventing Iran's use of nuclear weapons, which it surely will have within a couple of years, will require a multilateral full court press. Sniffing out and snuffing out Al Queda remains an important multilateral task.

The Nobel Committee probably thinks it did the international community a good turn by conferring the Peace Prize on Barack Obama. In actuality, it did America a favor, by acknowledging it is so important that its recently elected chief executive should receive the prize for simply changing the tone of international dialogue.