It's the European economy, stupid

In Obama vs. Romney, Merkel holds the key cards

So the Greek and Spanish economies are bleeding out all over the floor of the Eurozone. Blood drips from not-yet-fatal Italian wounds, as well.

A recently announced deal to bail out Spanish banks has put off the reckoning for now, but the next round of European panic is probably a few days away, at most. Bank failures or default on debt payments by one of the southern European countries seem all but inevitable, so does a deepening of the current Eurozone recession. When that happens it will be bad news for the increasingly fragile American economy, which appears unlikely to gather much strength between now and the November election.

Everyone knows what that means: Mitt Romney will defeat Barack Obama.

Though the race may be tight, if the global economic slowdown is big enough, Romney’s coattails may lengthen enough to protect arrogant and naïve Republican members of the House of Representatives from the election-day judgment they deserve. Spared from defeat, the Tea Party will plunge ahead with the deconstruction of the federal government’s capacity to initiate, maintain, protect, invest, underwrite and regulate. And aided and abetted by Tea Party populists, Romney will implement his own limited agenda deregulating corporations, privatizing benefits, socializing risk and subsidizing the wealthy.

By the time that’s done, Romney will have crashed whatever remains of the American economy and will be a one-term president, himself. But, afterward, it will take decades of progressive policies to restore a stable and fair economy that rewards effort rather than wealth.

Because the health of the American economy and the outcome of the election in the United States very likely rides on what happens to the Eurozone, Obama has been lobbying European leaders to save the Eurozone by bailing out and stimulating the economies of the southern tier. In this matter, with the English wandering around in their own economic funk and French socialists praying for relevance, German Prime Minister Angela Merkel swings the most weight. And Merkel’s instincts seem conservative. She has been a champion of tough love and bitter restraint for the Greeks. And although the recent deal with Spanish banks was more generous and forgiving, Merkel will err on the side of caution. She will prefer to avoid any further moves that rely on stimulus.

As the fifth biggest economy in the world and an industrial powerhouse, Germany likely can survive even a partial collapse of the Eurozone. But the German economy, too, is weakening, forcing Merkel to consider whether it is worth it to be the only European economy left standing after the dust settles. Ultimately, the policy math might lead to the conclusion that continued bailouts for weaker economies will be the best thing for Germany. If so, the American recovery will stagger ahead, possibly even gain steam in time for a few good job-creating months immediately preceding the November election.

Everyone knows what that means: Barack Obama will defeat Mitt Romney.

Whatever a second term for Obama might mean, it will not mean permanent tax cuts for the rich, new and large subsidies for dirty energy or a resurgent Tea Party. But the big question is this: If European failure will tank the American economy and, with it, Obama’s chances for re-election, what kind of advice might Mitt Romney’s campaign give Angela Merkel on the subject of medicating sick European economies? Before you answer that question, consider that the Reagan campaign in 1980 was alleged to have done something similar, completely undermining Jimmy Carter's re-election chances.