In an event yesterday at the Council on Foreign Relations, U.S. Treasury Secretary Tim Geithner doubled down on the president's recent insistence that the U.S. role on the Euro crisis is to "prod, advise, [and] suggest." From Geither's comments (emphasis is mine):
[W]e can't want this more than them, and we can't make these choices for them. It's 17 countries, incredibly difficult politics. The economics and financials of this is very tough, and so they're going to have to figure out what works for them.
And what we are doing is what I think we can do, the maximum we can do, is we're trying to be as helpful as possible, as persuasive as possible. They come to us all the time to ask us for ideas on what might work. They look at the lessons from our experience and -- (inaudible) -- were willing to give that advice and help in that context, and where we have the capacity to help them financially, we're doing that.
The Federal Reserve is doing what we can do uniquely, which is giving them access to dollar swap lines, which are very, very important to what they're facing now, which we've done -- we've done quickly and on a very substantial scale. And of course we're supporting what the IMF is doing in that context.
And you know, there are people who say that we should be louder in telling them what to do, and that would be more helpful. I don't think so. And there are people who say we should go write them a check so they don't have to write a larger check to help underpin the monetary union. I don't see how that's -- how that's defensible. You know, they're a very rich continent. This is within their capacity to manage, and if we, the world, try to limit the burden and then to fix it, then the credibility of their commitment to the endeavor will look weaker, and that won't help.
Embedded in Geithner's remark, however, was a tacit acknowledgement of an alternative path: The United States has and continues to support the IMF's contributions to the European bailouts. And throughout the crisis, the IMF has served as wingman to the EU's remarkably ineffective crisis management efforts. Yes, IMF officials and key shareholders have chided European leaders periodically. But, ultimately, they have gone along for the ride.
What other option was there? The United States might have worked with other major economies to insist that any IMF contribution or blessing be accompanied by full-scale negotiations between the Fund's key members and the EU as a whole. Together, the major non-European economic powers could have demanded that any IMF contribution or technical assistance be preceded by a comprehensive solution to the Eurozone's architectural defects.
All of this would have required an enormous diplomatic effort. It would have irritated the Europeans mightily. It might have meant putting some new American money into the IMF kitty. And there's no guarantee it would have worked. Europe might simply have said that they didn't need the IMF. But a strategy of more direct confrontation might also have accorded European politicians--and particularly German leaders--some political cover, allowing them to claim that the world had effectively given them an ultimatum.
When the Euro crisis has done its worst, I suspect not making that effort is going to look awfully shortsighted.
David Bosco reports on the new world order for The Multilateralist.