Philip Stephens, FT 21 July, 2011
The pessimistic case starts with the financial crash of 2008. This was the event that crystallised the new geopolitical order. Hitherto such events had belonged to developing nations – to Latin America or to Asia.
This one was made in America.
The sacred text of liberal capitalism known as the Washington consensus was shredded.
As the US and Europe tumbled into recession, it was left to the likes of China, India and Brazil to avert a slump.
The psychological impact has been profound. The west has lost its audience in the rising nations as the banking crisis has become a sovereign debt crisis. For outsiders looking in, this is about more than economics. They see a failure of liberal democracy.
Serious fractures have appeared in the European project. The threat to the single currency could have been averted by the exercise of collective political resolve. But Europe’s politicians have run scared of disgruntled national electorates.
The markets have punished them for their timidity, turning a debt problem on the eurozone’s periphery into an existential threat to monetary union.
The crisis will pass only if the agreement reached at this week’s summit signals that Ms Merkel, France’s Nicholas Sarkozy and the others have finally come to terms with the logic of the euro: the debts of one are the debts of all.
When the commander of America’s military forces is asked what he considers the biggest threat to national security, Admiral Mike Mullen answers that it is the federal deficit.
The US is the world’s biggest debtor. If it wants to remain the pre-eminent military power, it has to repair its finances.
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