European Union Ambassador: Debt crisis has global and economic impact

BY KRISTEN EAST | MARCH 29, 2012 6:30 AM

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The European Union's ambassador to the United States called upon Iowans to recognize the local and global impact of the European debt crisis, noting the long-standing relationship between the United States and Europe.

João Vale de Almeida told the audience at a lecture in the University of Iowa Boyd Law Building on Wednesday that in an interconnected world, "what happens in Iowa affects what happens in Greece."

"This is not a Washington issue," Vale de Almeida said. "In today's world … there is no such thing as the middle of nowhere. We are all in the middle of the world."

The European Union's website describes the relationship between the EU and the U.S. as the largest economic link in the world. Together, the two nations make up more than 50 percent of the global gross domestic product and 30 percent of global trade. Iowa alone sold roughly $2 billion in goods to Europe in 2011, a 27 percent increase over 2010, according to a Transatlantic Economy report.

Vale de Almeida, speaking on the current state of the EU, said he is hopeful but the crisis is far from over.

"In a nutshell, we are coming out of the woods," he said. "We're coming out of the woods … but we're not out of the woods yet. The last two or three months have brought us good news, and I am more optimistic today than I was in November."

The European debt crisis was brought on by several eurozone countries running large budget deficits and borrowing money from central European banks, said Patrick Barron, a UI adjunct lecturer in economics. Out of 27 member states, 17 of those countries use the euro as their currency. Portugal, Ireland, Italy, Greece, and Spain are some of the countries most affected by debt, he noted.

Barron said the debt crisis isn't the biggest threat facing the U.S. economy, but it does have an effect on the United States because of trade.

"We have to realize that we can't run other peoples' countries for them," he said. "We should set a good example of a noninterventionist monetary policy. If we had done that in 2008, we would have been out of this recession probably two years ago — but the [U.S.] government is intervening."

But one international-relations expert said the U.S. involvement in Europe's crisis is inevitable.

"It's not really an exclusively European problem," said Christian Jensen, a UI assistant professor of political science. "The countries that are in crisis in Europe are borrowing money … and a lot of that borrowing was coming from major international banks."

Jensen said the debt crisis will likely have a large effect on the world economy because of the extensive world banking system.

"These banks are highly interdependent with each other," he said. "It would be a mistake to assume that just because most of the lending, to say Greece, is either coming from German or French banks, that this doesn't affect the United States directly. It's very difficult to disentangle our interests in what's going on in Europe."

Vale de Almeida, however, said the crisis has provided the European Union an opportunity to bring member states together politically and centralize economic policies.

"All of these measures are moving in one direction, and that is to further integrate Europe, further strengthen the European Union — not destroying, not going backwards," the ambassador said. "We're basically deciding how fast and how far we want to move forward."

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