The shrill anti-incumbent message that has emerged from a pair of European elections carries a threat to the U.S. economic recovery and a political warning for President Obama, whose reelection prospects could hinge on whether the economy can improve.
Voters in Greece rejected both major political parties amid a dire fiscal situation there. In France, a disenchanted electorate tossed out President Nicolas Sarkozy in favor of a socialist who, like Obama, believes too much emphasis has been placed on austerity measures at the expense of stimulating growth.
The immediate danger for Obama is that the political uncertainty that surfaced Monday will probably take months to settle. That could make it harder to address the economic crisis on the continent, potentially undermining the finances of several more governments and rattling global markets.
The result could shake the already fragile American recovery, which Obama has complained is being held back by a weak euro-zone economy that serves as a chief destination for U.S. exports.
A new round of political paralysis that delays Europe’s recovery or calls into question the austerity agreement reached this year to help bail out Greece would probably lead to an immediate slowdown of U.S. economic growth and job creation while confusing bond and equity markets.
“Our economy continues to face some headwinds, and the euro-zone crisis is one of them,” White House press secretary Jay Carney told reporters Monday.
The debate in Europe between spending that would add to already-high government debt or cutting back sharply on public services mirrors the one that has shaped the politics of recovery in the United States.
Obama’s argument to European leaders such as German Chancellor Angela Merkel, the leading voice for austerity, has been that more spending and looser monetary policy would help promote recovery in the short term and could be reined in later.
That message is resonating in European politics, most notably in the Sunday election in France of Francois Hollande, the first Socialist Party candidate to ascend to the presidency since Francois Mitterrand left office in 1995.
The course for Europe will now be drawn in part by the next Greek government, whenever one emerges, and Hollande, who has outlined a number of ways short of new spending to ease the economic hardship that has resulted from austerity measures across the continent.
Obama will have a say in the discussion as early as next week, when leaders of the Group of Eight industrial economies meet at Camp David.
There he will probably find himself playing the role of intermediary between Hollande and Merkel, two leaders who, like Obama, have cool, pragmatic temperaments, a contrast to the unpredictable Sarkozy.
At issue will be not only France’s fiscal approach but also whether European leaders will hold Greece’s next government accountable for the agreement negotiated in February that allowed for a rescue package of $171 billion in emergency loans.
Greece’s two main parties lost badly at the polls for supporting that deal and the austerity measures it entailed, and Carney noted Monday that “the Greek people have made many sacrifices to address that country’s economic crisis.
“Greece’s economic reform program remains vital to sustaining fiscal stability, to spurring economic growth, and to a more prosperous future for Greece and the entire region,” he said.
The White House message appeared in line with the one Merkel sent Monday to Greece and other European leaders, including Hollande, who have been swept to power on an anti-austerity platform.
“Obviously it is of utmost importance that the programs we have agreed on with Greece are continued,” she told reporters in Berlin. “The process is a difficult one, but despite that, it should go on.”
Merkel has chided Obama in the past for his stimulus spending, even as the left wing of his party calls for far more to create jobs and drive down unemployment.
But European electorates, who have helped caused the collapse or electoral defeat of a series of governments in recent months, are moving swiftly toward the more pro-growth position that Hollande and others have embraced.
Obama’s goal, for the U.S. economy and for his own political welfare, will be to prevent a deepening of the euro-zone debt crisis that has already called into question the future of the economic union.
“Hollande can be the catalyst for a new consensus that is more balanced toward growth than the previous political line,” said Justin Vaisse, director of research for the Center on the United States and Europe at the Brookings Institution.
Vaisse acknowledged that his view that Hollande’s election makes a solution to the euro crisis more likely is “an optimistic take,” adding that “obviously the devil will be in the details.”
He also noted that, even though Hollande is closer than Sarkozy was to Obama’s preferred approach to Europe’s recovery, that may be lost in translation as it becomes part of American campaign politics.
“The flip side is having [Mitt] Romney make the case that now Obama is adopting the ideas of a French socialist,” Vaisse said. “Hollande is indeed a French socialist, and while that is not as bad as it sounds, it is an epithet in this country.”
Others are less certain that Hollande’s election — and Greece’s repudiation of its main political parties — is a hopeful sign.
“This will lead to months of economic uncertainty and turmoil in Europe, which will have a direct impact on the U.S. markets, as well,” said Nile Gardiner, director of the Margaret Thatcher Center for Freedom at the Heritage Foundation.
“This will reinforce the image in the minds of many Americans that President Obama is a quintessentially European-style politician who has pursued a lot of the same policies that Hollande is now promising to implement in France,” he added.