Merkel Called Bankers’ Bluff to Win Europe a Debt PlanOr a narrative about our president like this:
But Mrs. Merkel called the bankers’ bluff, said officials present at the discussions. Accept the 50 percent write-down, she told the bankers, or bear the consequences of default. In effect, she was willing to risk a credit event, and to place the blame for any fallout on them.The key words here are no, risk, and blame. Conspicuously absent from Obama's negotiating vocabulary and repertoire.
Yes, the European debt deal is inadequate and leaves core questions unresolved -- how the banks will recapitalize, how the bailout fund will be funded, how countries crippled by imposed austerity can grow and thus repay their debt. But given the imperative to get this minimum threshold demand across, Merkel didn't blink.
There is a slight distinction here, however.
ReplyDeleteEven though the European bankers were dumb enough to get in bed with the Greek sovereign debt, Merkel was still dealing with somewhat rational actors. In addition, her position held better leverage. The bankers could've taken a 100% loss or a 50% loss. Much easier to call their bluff with those options (they're European moneymen, not Tea Partiers misquoting Thomas Jefferson).
In contract, Obama was dealing with a rebellious and some would say a downright crazy group of House Republicans (a group that neither Cantor nor Boehner could truly control).
Wrecking the US economy would have been the end of the Obama presidency. Rightly or wrongly, Obama made a tactical retreat to live to fight another day (perhaps anticipating a future decline of the Tea Party hysteria).
On the surface level, the Merkel/Obama contrast is easy to make. But analyzing the players they were negotiating with reveals dissimilar scenarios. Yet smarmy fantasists like Drew Westen (who you rightly eviscerated) would eat this up.
At the moment, no one really knows whether Obama was right or wrong in dealing with it the way he did. We can only know that in hindsight if he goes on to win another term and lives to enact other parts of his agenda.
PS-- The Europe deal is far from over. While the Greek debt has been somewhat addressed, the fiasco that is the Italian government is up next! ...And now the Europeans are begging the Chinese for money (http://www.nytimes.com/2011/10/29/world/asia/europe-seeks-chinese-investment-in-euro-rescue.html?_r=1&hp).
Hi Minneapolis: I also thought of the various ways the analogy is limited but decided that it held at its core. I think Obama should have had two absolute negotiating conditions: no debt deal end-stopped by the debt ceiling deadline, and no debt deal without new revenues. His leverage was the 14th amendment -- if it was good enough for Bill Clinton, who said he'd use it if he were in O's place, it should have been good enough for Obama. Properly set up that is, with earlier insistence on a clean debt ceiling bill followed by the kind of gradual, indirect introduction of the 14th amendment option that it did in fact get, first from Constitutional scholars and then from Dem operatives and congressmen. Merkel could have been destroyed by failure to get a deal, too, and triggered just as big a financial catastrophe. But she didn't blink.
ReplyDelete