The slowing down in Eurozone has global implications for American companies and this is likely to further affect the American economy which will directly have impact on the chances President Obama’s re-election

Spain became the fourth European country to get a bailout last weekend and though it was framed politely as a bailout for the Spanish banks it was difficult to hide the fact that it was a Spanish bailout. Portugal, Greece and Ireland have had received bailouts earlier. The Spanish bailout amounted to 100 billion euros whereas the Portugal bailout was 78 billion euros and the Irish bailout 67 billion euros. The biggest bailout was for Greece at 345 billion euros and Greece was not even grateful for it. There is a real possibility that after the elections on 17 June 2012 Greece would try to renegotiate the terms of bailout. But the Spanish bailout was the most serious of all as Spain is the fourth biggest Eurozone economy.

Further it was unlikely that the bailouts would give the so-called PIGS (Portugal, Ireland Greece and Spain) wings. The idea that the Euro was an irreversible project was suddenly in doubt. It was also clear that Spain would not be the last country in Europe requiring the bailout. There was talk of Cyprus being next and most worrying of all.

Much was uncertain but one thing was certain and that was the fact that the Europe was in crisis. Everyone was looking towards Germany for help. Germany was the only one with pockets deep enough to make a difference. German chancellor Angela Merkel was talking of deepening the Eurozone into a fiscal union but seeing the Greek reaction to the bailout that was unlikely to be greeted with hosannas. The question was how to deal with a multispeed Europe while a single currency is still open. Everyone is now wondering how no one thought it when the Eurozone was created. Some talked of a calibrated exit of Greece from the euro but no one really knew of all the consequences and no one was willing to take a chance. The freefall had been averted for the moment.
 
This has direct consequence for the US presidential election. The European Union and the US together account for half the world’s gross domestic product (GDP) and nearly a third of the trade flows. The slowing down in Eurozone has global implications for American companies. David Axlerod told Candy Crawely on the State of the Union programme on CNN that the “Storm clouds from Europe are on their way”. This is likely to further affect the American economy which will directly have impact on the chances President Obama’s re-election.

But along with economic mess Europe  has had two elections in the last month—one in France the second  largest Eurozone economy and the other one in Greece where the position of conservative was decisively rejected in favour of in policies of economic expansion. In France in Socialist Francois Hollande trounced the conservative President Nikolas Sarkozy to become president and in the Greek parliamentary election, the parties which supported the bailout failed to secure majority. A second election is to be held.

The conservative policies in Europe are not dissimilar to the Republican policies in the United States—they believe in running a tight fiscal shop with a smaller budget deficit and the stimulus in the economy comes by way of tax cuts. Whereas the socialist position is not dissimilar to the position of the Democratic party in the US which believes in growth through stimulating the economy through higher spending and reducing the fiscal deficit by taxing the rich.
 
So when the results came from Europe Bill Clinton seized the moment immediately and said “Why aren’t things roaring along now? And that is because the Republicans in Congress have adopted the European economic policies. But complicating the matter was the election for the recall of the governor Scott Walker in the mid-western state of Wisconsin where he had followed the policy of fiscal conservatism in extreme and he handily thumped the democratic challenger. Governor Mitt Romney was quick to seize the moment and announce that the message of Wisconsin was clear and that American did not want more policemen, firemen and teachers.  These were the very things that President Obama wanted Congress to do shore up jobs.
 
But the most surprising thing was some urged a new Marshall plan for Europe but for that they looked not towards the United States of America with its 14.5 trillion dollar deficit but towards Germany.
 
The results from Wisconsin on the face of it could not be more different from the results in France. But look a little deeper and it makes more sense. France tried to resort to fiscal cutting after expansion of many years. And it is after fiscal cutting, the French are now seeking expansion. Wisconsin and may be America are at a different stage. After expansion they are seeking fiscal cutting. So it may well be that the message from Europe may not reach America.

(Harsh Desai has done his BA in Political Science from St Xavier's College & Elphinstone College, Bombay and has done his Master's in Law from Columbia University in the city of New York. He is a practicing advocate at the Bombay High Court.)