Clash of wills

The euro crisis has been worrying the US government for some time. Apart from the bankruptcy of Greece, US Treasury Secretary Timothy Geithner is nervous about the high interest rates that Spain and Italy are paying on their bonds.

On Monday Geithner travelled to Germany to discuss the latest developments in the eurozone with his German counterpart Wolfgang Schäuble. The meeting, initiated by the Americans, took place on the island of Sylt, where Schäuble is currently enjoying his summer holiday.

No concrete statements

Following the meeting, the German Finance Ministry said Schäuble and Geithner had re-emphasized the "necessity of continued international cooperation" in the struggle against the European crisis, and ascertained that there had been progress in all of Europe's crisis-hit countries. At the same time, they underlined that "all the reform measures necessary to master the financial crisis needed to be agreed and implemented." The ministry added that the "statements by the EU's policymakers in the past week" had been acknowledged.

At the weekend, Eurogroup chief Jean-Claude Juncker had once again warned against a collapse of the eurozone. "We have arrived at a decisive point," he said in a newspaper interview. "The world is talking about whether the eurozone will still exist in a few months."

Juncker also said that the euro countries, the European bailout fund EFSF, and the European Central Bank should be prepared to buy the bonds of struggling countries in an emergency. Juncker also gave some of the blame for the failure to get to grips with the crisis to the German government, who, he said, was allowing itself the luxury of "getting caught up in domestic politics in euro questions."

The bond issue

The US has also repeatedly urged Germany to give up its austerity programs and help by buying up bonds. "The fear of inflation is a typical German characteristic, that is well-justified, but which is hardly understood in elsewhere," said Peter Tillmann, professor for monetary economy at the University of Giessen. He told DW that the US was used to giving its Federal Reserve a much freer hand for economic measures.

Unlike the ECB, the Federal Reserve is not only responsible for price stability, but also for securing economic stability. Tillmann is also critical of Juncker and Geithner's call for the buying up of state bonds. "We have a debt problem, not a liquidity problem, and we can't solve that by simply generously supplying liquidity through the ECB," he said.

Fear of crisis spreading

But Tillmann is surprised that the otherwise liberal market Americans are so open to state intervention in the financial markets. "Maybe they're clutching at the last straw," he speculated. "Or maybe during their election campaign they want to point a finger at the European governments for not doing enough about the crisis."

It's probably no accident that Geithner's spontaneous visit to Germany happened in the middle of the presidential campaign in the US. The euro crisis has had a negative impact on the US economy, and therefore on President Barack Obama's record. "If the eurozone economy is damaged, then that's bad for American exports into Europe for one thing," said Tillmann.

But he added it would also have an indirect impact on the exchange rate. "If the euro starts being avoided and a lot of capital flows into the dollar, it will depreciate and American products will become more expensive worldwide," he said. And of course the euro crisis is contributing to the global economic weakening, which is being felt in the US. Second quarter growth in the US was only at 1.5 percent, which unemployment reached a new record of eight percent.

After the meeting with Schäuble, Geithner flew on to Frankfurt for a meeting with ECB President Mario Draghi. Draghi, for his part, indicated only last week that the ECB would be willing to buy up bonds after all.