Does Angela Merkel Hold The Keys To Obama’s Reelection?

Treasury Secretary Timothy Geithner has been urging Europeans to get it together.

Photo by Michael Nagle/Getty Images

Helene Cooper teaming up with my predecessor in this space Annie Lowrey write that it does, and that anxiety about this point is part of the backdrop for Timothy Geithner’s quiet trip around Europe urging a resolution. As a confirmed economic determinist about presidential elections and the other of a recent piece titled “Eurodoom: The terrifying new theory that the European economic crisis could devastate the U.S.” I am sympathetic to these concerns.

That said, I don’t like to give into fatalism either. Sometimes countries are so intertwined that business cycle linkage is inevitable. When America sneezes, Canada catches cold, because Canadian enterprises are so intertwined with the U.S. markets. Similarly, a German recession will naturally spread to Denmark. America and the Eurozone aren’t really like that. The United States is a very large country that’s not all that dependent on foreign trade in general, and that has a number of large trade partners outside the Eurozone. The case for doom fundamentally works through a bank lending channel. If European banks deleverage, that dries up credit availability in the United States. That certainly could doom us, but I’m not sure I see a reason why it would have to doom us. Availability of dollar-denominated loans is basically a renewable resource. We have a central bank and a Treasury Department for a reason and at this point they all seem well-aware of the basic stakes. So the issue in my mind is less whether Europe will take us down than it is whether if Europe screws this up, are our policymakers ready and willing to deploy the tools that are needed tokeep us above water.