Whether (and how and when) Germany acts to save the euro will exert huge influence over the U.S. economy, too, and thus over the outcome of the presidential election.
Next question: How much influence?
Everybody agrees that the troubles in the eurozone hurt the U.S. economy. When your trading partners slump, you slump with them. Everybody agrees that the uncertainty over the future of the euro currency worries U.S. financial markets. If the currency fails, European banks plunge into a crisis that would be a replay of the shock of 2008.
It’s clear that German Chancellor Angela Merkel has the power by saying “no” to lose the presidency for Barack Obama. Could she win it for him with a “yes”?But what remains deeply uncertain is the upside of the equation: how much benefit would the U.S. gain if Europe did somehow find a solution to the euro problem.
By the trade numbers, faster growth in Europe would seem relatively unimportant to the U.S. economy. Trade accounts for only about a quarter of the U.S. economy, and trade with the entire European Union represents less than a fifth of that one-fifth.
Now remember that the European Union includes a number of important countries, such as the United Kingdom, that do not use the euro. And the largest economy in the eurozone, Germany, continues to buy and sell strongly. A fillip to the economies of Spain, Italy and France would be welcome news but hardly decisive to a U.S. economy still recovering from its own financial crisis.
To close the gap from here to there, though, the U.S. needs a jolt. Could a euro rescue administer it?