By Cliff Montgomery – Mar. 17th, 2009
A March report from the Congressional Research Service precisely states what’s at stake thanks to theunmitigated greed and incompetence of Wall Street: nothing less than the stability of both America and thecountries of Europe.
Below the American Spark offers quotes from this sober study:
“According to the most recent National Threat Assessment, the global financial crisis and its geopoliticalimplications pose the primary near-term security concern of the United States. Over the short run, both theEuropean Union (EU) and the United States are attempting to resolve the financial crisis while stimulatingdomestic demand to stem the economic downturn.”
“These efforts have born modest progress so far as the economic recession and the financial crisis havebecome reinforcing events, which are forcing EU governments to forge policy responses to both crises.”
“In addition, both the United States and the EU likely will confront the prospect of growing economic andpolitical instability in Eastern Europe and elsewhere over the impact of the economic recession on restivepopulations. In the long run, the United States and the EU likely will search for a regulatory scheme thatprovides for greater stability while not inadvertently offering advantages to any one country or group.
“Throughout the crisis, the European Central Bank and other central banks have assumed a critical role as theprimary institutions with the necessary political and economic clout to respond effectively. Within Europe,national governments, private firms, and international organizations have varied in their response to thefinancial crisis, reflecting differing views over the proper policy course to pursue and the unequal effects of thefinancial crisis and the economic downturn.
“Initially, some EU members preferred to address the crisis on a case-by-case basis. As the crisis haspersisted, however, leaders have begun looking for a systemic approach that ultimately may affect the drivewithin Europe toward greater economic integration.”
“In addition, public protests, sparked by rising rates of unemployment and concerns over the growing financialand economic turmoil, are increasing the political stakes for EU governments and their leaders. The globaleconomic crisis is straining the ties that bind together the members of the EU and could present a significantchallenge to the ideals of solidarity and common interests.
“[Also], the longer the economic downturn persists, the greater the prospects are that international pressurewill mount against those governments that are perceived as not carrying their share of the responsibility forstimulating their economies to an extent that is commensurate with the size of their economy.
“According to Dennis Blair, Director of U.S. National Intelligence, the global financial crisis and its geopoliticalimplications pose, ‘the primary near-term security concern of the United States.’ In addition, he said, ‘Thelonger it takes for the [economic] recovery to begin, the greater the likelihood of serious damage to U.S.strategic interests. Roughly a quarter of the countries in the world have already experienced low-level instabilitysuch as government changes because of the current slowdown.’ “
“Various EU governments have had to expend public resources to rescue failing banks, in addition toprotecting depositors and utilizing monetary and fiscal tools to support banks, to unfreeze credit markets, andto stimulate economic growth. […]
“The differential effects of the economic downturn, however, are dividing the wealthier countries of theEurozone from the poorer countries within the EU and in East Europe and are compounding [the need] torespond to the financial crisis and the economic recession. Once the immediate issues are resolved, EUgovernments likely will address long-term solutions to regulating and supervising financial markets. […]
“EU members are also concerned over the impact the financial crisis and the economic recession are havingon the economies of East Europe and prospects for political instability as well as future prospects for marketreforms [i.e., elimination of a country’s social safety net for those who aren’t at least millionaires].”
“Governments elsewhere in Europe, such as Iceland and Latvia, have collapsed as a result of public protestsover the way their governments have handled their economies during the crisis, and the International MonetaryFund has issued emergency loans to Hungary and Ukraine. The World Bank–in a joint effort with theEuropean Bank for Reconstruction and Development and the European Investment Bank–announced onFebruary 27, 2009 that they were providing $31 billion over two years to assist ailing banks and businesses inEastern and Central Europe.”
“[Thus] for the United States and the members of the European Union the stakes are high. […] The financialcrisis and the economic downturn have become global events and likely will dominate the attention ofpolicymakers for some time to come. Governments that have expended considerable resources utilizing fiscaland monetary policy tools to stabilize the financial system and to provide a boost to their economies may berequired to be increasingly more inventive in providing yet more stimulus to their economies and face politicalunrest in domestic populations.”
