Negative economic developments in the European Union are prompting concern over several countries’ state of health and what might be the causes of the malady.
Second quarter results for the economy of normally stalwart Germany showed 0.2 percent shrinkage. France’s performance for that period resulted in zero growth. The second-largest bank in Portugal, Espirito Santo, collapsed last month and its chief holding companies have filed for bankruptcy. A major bank in Bulgaria folded, prompting the resignation of the prime minister and the scheduling of early elections for October. Italy showed a second straight quarter of negative growth, placing it officially in recession.
All of this is important to the United States. First, U.S. two-way trade with EU countries amounts to about $1 trillion, making them America’s most important partners. Second, the financial systems of the United States and Europe are massively intertwined. Some of that relationship is unnecessary, based on tricky Wall Street speculation in high-interest, high-risk European bank bonds.
Second, the Obama administration continues to lean on European countries to provide support for some of its foreign policy moves in the Middle East, Eastern Europe and Africa. The rescue of the Iraqi Yazidis from the Sinjar mountains, which was one reason put forward by the administration for military aid to the Kurds in a region with oil and other U.S. commercial interests, was to have been supported by France and the United Kingdom, for example.
The degree to which European countries’ financial problems have been created by U.S.-led sanctions, other actions and status-quo-altering policies with respect to Russia and Ukraine is as yet unclear. Given the importance of Russia as both a supplier of energy and a customer for EU goods, and the steps its president, Vladimir V. Putin, has taken in response to actions against Russia, it would be difficult to argue that the Europeans have not damaged their own economies by following the U.S. lead in their foreign policies.
It is likely that European leaders will tell President Barack Obama so at the NATO summit in Wales in early September.