On the eve of the G-20 meeting of world leaders, President Obama said that the U.S. alone cannot bring the world out of a recession — and he called on European countries to boost stimulus spending.
But last week, the current president of the European Union, Mirek Topolanek of the Czech Republic, called Obama's economic policies "the road to hell."
John Bruton, the EU's ambassador to the United States, tells NPR that the reason for European objections is that borrowing money may be difficult for many of the 27 countries who make up the EU. Some of those countries, like Germany and Britain, are pumping stimulus money into their economies. But others, like Ireland, Latvia and Hungary, are paying higher interest rates to borrow — if they can borrow — Bruton says.
"It's much easier for the United States, which has the reserve currency, which borrows dollars from itself and from its own people in its own currency," Bruton tells NPR's Melissa Block. "And can re-juice its debts eventually even if the dollar is devalued."
Bruton, who also is the former prime minister of Ireland, says the countries in Europe are either trying to defend a new currency — the euro — or a very small currency.
Another issue that has divided the U.S. and Europe is the question of international regulation, but they are "approaching one another more closely all of the time," Bruton says. He says the U.S. has said it's prepared to move forward on regulating hedge funds and rating agencies, while Europe is further down that road.
"It's very important that we have regulations that we each recognize is adequate for one another's purposes and we don't have to duplicate," Bruton says. "And I think that that's where we're heading in the G-20."
Bruton is careful to say that regulation and supervision, unless they're well-designed, will not resolve the problem. He says the U.S. and Europe need to infuse more money into the International Monetary Fund to help strengthen its balance sheet. Bruton says he thinks that's a decision that will be made at the G-20 summit.
"Another vitally important thing is to put more money into the IMF if we're transferring the debts of private sector banks to the taxpayers and to governments, because we need to, because we need to keep banking going — not because we love bankers," Bruton says. "There may be the risk that the governments will themselves get into financial difficulty. Who's going to help them? The International Monetary Fund. Does the International Monetary Fund have enough money to do that at the moment? No, it doesn't."
As for whether Europe blames the U.S. for the economic crisis, Bruton says there is the sense that the U.S. pioneered the financial system that leverages debt, but that it was embraced by the Europeans.
"Nobody forced any of the European banks who bought securitized assets — nobody forced them to do so," Bruton says. "So we all have to take responsibility. I think blaming one country is completely misplaced and a waste of time. What we've got to do now is deal with the problem going forward into the future. And here, we have a mutual interest."