America and Europe sinking together

Both the EU and US have struggled to cope with the economic crisis in their own distinctive ways. A monumental error, argues Gideon Rachman, since their problems are essentially the same.

Published on 5 July 2011 at 13:19

In Washington they are arguing about a debt ceiling; in Brussels they are staring into a debt abyss. But the basic problem is the same. Both the US and the European Union have public finances that are out of control and political systems that are too dysfunctional to fix the problem. America and Europe are in the same sinking boat.

The debt debates underway in the US and the EU are so inward-looking and overwrought that surprisingly few people are making the connection. Yet the links that make this a generalised crisis of the west should be obvious.

On both sides of the Atlantic, it is now clear that much of the economic growth of the pre-crisis years was driven by an unsustainable and dangerous boom in credit. In the US it was homeowners who were at the centre of the crisis; in Europe, it was entire countries like Greece and Italy that took advantage of low interest rates to borrow unsustainably.

The financial crash of 2008 and its aftermath dealt a blow to state finances, as public debts soared. In both Europe and the US this one-off shock is compounded by demographic pressures that are increasing budgetary pressures, as the baby-boomers begin to retire.

Receive the best of European journalism straight to your inbox every Thursday

Finally, on both sides of the Atlantic, the economic crisis is polarising politics, so making it much harder to find rational solutions to the debt problem. Populist movements are on the rise – whether it is the Tea Party in the US or the Dutch Freedom party or True Finns in Europe. Read full article in Financial Times - registered users...

Tags

Was this article useful? If so we are delighted!

It is freely available because we believe that the right to free and independent information is essential for democracy. But this right is not guaranteed forever, and independence comes at a cost. We need your support in order to continue publishing independent, multilingual news for all Europeans.

Discover our subscription offers and their exclusive benefits and become a member of our community now!

Are you a news organisation, a business, an association or a foundation? Check out our bespoke editorial and translation services.

Support independent European journalism

European democracy needs independent media. Join our community!