A bubble burst, consumers cut spending, and investment plummeted. Unemployment soared to astronomical levels, banks failed, and U.S. GDP declined. Europe and the rest of the world were hit by the spillover from America’s economic woes. This is the world former U.S. President Herbert Hoover had to navigate in 1929, just after he took office during the onset of the Great Depression. President Barack Obama inherited a similar world – although not quite as severe – when he moved into the White House in 2009.
Rough Beginning: The 2008 Financial Crisis
The domestic challenges Obama faced as he took the helm, just four months after the collapse of Lehman Brothers in September 2008, were rough. Relations with European nations would prove equally as difficult. Many Europeans blamed the U.S. for their own economic turmoil.
Over-leveraged banks and financial institutions (reliant on mortgage-backed securities) in the U.S. and Europe were thrust into jeopardy when the American real estate market fell in 2007. When Lehman Brothers, America’s fourth-largest investment bank, went bankrupt, the contagion rapidly spread to Europe. “In a global financial system, national borders are porous,” New York Times White House correspondent Mark Landler wrote in September 2008.
By the end of Obama’s first year in office, five European Union (EU) member states – Greece, Ireland, Portugal, Spain, and Cyprus – were in dire economic straits, unable to pay off high amounts of government debt and bail out failing banks.
Tensions between the U.S. and the EU intensified due to the varying approaches to economic recovery on the two sides of the Atlantic.
“The state of our economy calls for action, bold and swift. And we will act, not only to create new jobs, but to lay a new foundation for growth,” said Obama in his January 2009 inaugural address. “We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together,” he continued. This Keynesian approach to recovery – government spending to stimulate demand – laid in stark contrast to the German, and hence EU, approach.
As the EU’s largest economy, a net exporter, and a nation with a past of extreme hyperinflation, Germany, under Chancellor Angela Merkel, advocated for austerity to end the financial crisis. Using strict austerity measures, Germany recovered relatively quickly. However, many of its struggling EU neighbors did not. Indeed, German insistence on austerity in return for bailout money (which only Germany could provide) seemed to make matters worse.
Washington openly criticized Germany’s handling of the crisis. Former Federal Reserve Chairman Ben Bernanke (2006-2014) laid blame to “excessively tight fiscal policies, especially in countries like Germany” for “the slow recovery from the crisis of the euro zone.” In October, Obama told Italian newspaper la Repubblica, “As I’ve said before, I do believe that austerity measures have contributed to slower growth in Europe.”
Seeds of Populism Sown
Slow growth and the economic malaise that overtook Europe beginning in 2008 helped sow the seeds of populist movements across the continent that are, if not explicitly anti-U.S., opposed to many tenets of Obama’s foreign policy.
The Transatlantic Trade and Investment Partnership (TTIP) acts as a rallying point. Germany’s Alternative für Deutschland (AfD), France’s Front National (FN), and Britain’s UK Independence Party (UKIP) – populist parties which all gained ground throughout Obama’s tenure – oppose the free trade deal between the U.S. and Europe.
“America and Europe have done extraordinary things together before. And I believe we can forge an economic alliance as strong as our diplomatic and security alliances […] So this Transatlantic Trade and Investment Partnership is going to be a priority of mine and my administration,” Obama said at a press conference in Northern Ireland in 2013.
Four years later, TTIP has yet to be signed, and populist parties in Europe, along with U.S. President-elect Donald Trump, continue to oppose it adamantly.
Russia is another area in which distance between the U.S. and EU was forged, partially due to populist sentiment. European populist parties support closer ties with Russia, and some are allegedly receiving financing from their eastern neighbor, including France’s FN.
However, it is not only the populists who go head to head with Obama over his Russia policy. Although the Europeans joined with Obama in imposing sanctions against Russia after its incursions in eastern Ukraine and annexation of Crimea, they did so with some reluctance. Many Europeans are dependent on Russia for oil and natural gas.
In November, Andrew S. Weiss – Vice President for Studies at the Carnegie Endowment for International Peace – told reporters the U.S. is currently the “glue” keeping the EU interested in Russian sanctions.
Missile Defense Flip-Flop
Europe’s other point of contention with Obama vis-à-vis Russia has to do with the Administration’s on-again, off-again policy toward missile defense in Europe.
A number of countries in Central and Eastern Europe view Russia as a potential threat and the U.S. and NATO as their protectors.
In 2009, Obama scrapped plans to build a missile defense system in Poland and the Czech Republic. Although the Administration consistently said the decision had nothing to do with Russia, but rather with new information about Iran’s missile capabilities, there is no denying that Moscow was pleased with the outcome, and Warsaw and Prague were not.
In its place, a new missile defense project – the Aegis Ballistic Missile Defense – was to be rolled out in phases. The final phase, which Russia strongly opposed, would include interceptors that could potentially target long-range intercontinental ballistic missiles (ICBM). The Obama Administration abandoned this phase in 2013, citing the need to shift resources to protect against North Korea, rather than Moscow. This time, Poland’s reaction was a bit more muted.
In May 2016, the Aegis Ashore Missile Defense System was finally unveiled in Romania. Unlike the original missile defense plan for Poland and the Czech Republic, which would have been a bilateral deployment, this system will be operated by the North Atlantic Treaty Organization (NATO).
NATO Needs to Spend More
Although the U.S. did follow through with a version of missile defense for Europe, Obama has maintained that European NATO members need to contribute their fair share to the defense organization, that is, they need to meet the two percent of GDP on defense spending goal agreed to in 2014.
After a meeting with then-NATO Secretary General Jaap de Hoop Scheffer in March 2009, Obama noted, “We have a set of challenges that require NATO to shift from the 20th century to the 21st century – issues of terrorism, failed states, nuclear proliferation […].”
At the NATO Summit in Wales five years later, Obama referred to the newly pledged two percent spending goal, saying, “These resources will help NATO invest in critical capabilities, including intelligence, surveillance, reconnaissance and missile defense. […] Our Alliance will […] rise to meet the challenges that we face in the 21st century.”
Two years after that, with a number of NATO members failing to meet the two percent target, Obama stated, “Given the range of threats that we face and the capabilities that we need, everybody has got to step up and everybody has got to do better.”
Obama did give credit where it is due, noting that the UK, Poland, Greece, and Estonia – along with the U.S. – pay their “full share of at least 2 percent of GDP for our collective defense.”
Other countries, like Germany, are seriously working toward the two percent mark. France is almost there, at an estimated 1.78 percent by the end of this year. Still, others are far off track. Luxembourg will have contributed a mere estimated 0.44 percent of its GDP to defense spending by year’s end, Belgium will be at 0.85 percent, and Spain at 0.91 percent.
“Europe should be ashamed that it is unable to garner the forces necessary to defend itself,” says U.S. Congressman Mike Turner (R-OH), who is president of the NATO Parliamentary Assembly.
Terrorism Shows Intelligence Gaps
In an increasingly threatening global landscape, Europeans are recognizing the importance of being able to defend themselves, while debating on how to best do that.
The proliferation of terror attacks – from Paris to Brussels to Nice to Berlin – has raised concerns in Washington about adequate intelligence operations in Europe. Christopher Piehota, U.S. Terrorist Screening Center Director, told CNN in April, it’s “concerning” that European partners do not utilize data provided by the U.S. to screen potential terrorists.
He also noted that the U.S. shares its watch lists with EU countries, but they don’t systematically use these lists to identify terror suspects or screen migrants.
The push from Washington for improved EU counterterrorism capabilities – including surveillance activities – has been met with resistance in Europe, a continent that was outraged by the NSA spying revelations in 2013.
At a trade show in Hanover, Germany in April, Obama made a strong statement. “I want to say this to young people who value their privacy and spend a lot of time on their phones: The threat of terrorism is real,” he said, adding, “I’ve worked to reform our surveillance programs to ensure that they’re consistent with the rule of law and upholding our values, like privacy.”
Obama’s words seem to have resonated with some. For example, Germany, which faced four attacks in July and more since then, including an attack on a Christmas market in Berlin this past December, is apparently seeking more funding for its intelligence agencies, according to a recently leaked budget report. The report says the funding will enhance surveillance operations by decrypting “non-standardized telecommunications.”
During Obama’s final state visit to Germany in November, Chancellor Merkel said, “Due to the fact of Islamist terrorism all over the world and the threat of IS, we recognize how important the cooperation with intelligence services, first and foremost, also with the services of the United States is.”
Areas of Cooperation
Obama started his tenure as U.S. President with a disaffected EU that blamed Washington for the continent’s economic troubles. Populist parties across Europe generally favor Russia over the United States. Obama’s missile defense flip-flop was to the chagrin of Poland and the Czech Republic. And tensions over approaches to defense, counterterrorism, and intelligence plague the U.S.-Europe relationship – not to mention Europe’s disapproval of the Guantanamo Bay detention facility remaining open.
However, as President Obama leaves the White House, there are also victories he can claim with Europe. Sanctions against Russia were effectively implemented with both the U.S. and EU on board. The EU as an institution, as well as individual European countries, joined the U.S.-led Global Coalition to Counter ISIL in 2014. European NATO countries are beginning to step up to the plate in spending, with about half increasing their defense expenditure as a share of GDP over the past year. And with the ever-growing terrorist threat, EU countries are beginning to upgrade counterterror and intelligence programs.
The Paris Agreement on climate change – an accord of great importance to the EU – was a huge coup. The U.S. Administration’s diplomacy with China, one of the world’s largest carbon emitters, was instrumental in sealing the deal. “Without the engagement of the current administration under the leadership of Barack Obama, the Paris agreement would never have come about,” remarked Merkel at a joint press conference in Berlin in November.
“This is the end of an eight-year cooperation that was very close indeed,” she continued, “German-American and European-American relations are a pillar of our foreign policy – a foreign policy that is obviously guided by interests, but that is very much also committed to shared values.”
Those shared values, said Obama, are “Our commitment to democracy; our commitment to rule of law; our commitment to the dignity of all people – in our own countries and around the world.”
U.S.-Europe relations faced many uphill battles over Obama’s eight years in office. But the history of transatlantic cooperation and shared values led to a number of positive outcomes that will shape Obama’s legacy in Europe.
Kaitlin Lavinder is a reporter at The Cipher Brief. Follow her on Twitter @KaitLavinder.
