How a Leadership Deficit Is Deepening the Debt Crisis

Obama, Merkel, Sarkozy overmatched, and the despair in Europe and the U.S. grows.

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[See 4 Lessons from Washington From Europe's Debt Crisis.]

Continued uncertainty lies ahead. Because of this leadership deficit, the road ahead, both politically and economically, remains perilous. Obama has promised an ambition jobs program. However, as the debt ceiling debate illustrated, congressional opposition can stall even the most modest presidential initiative. At the same time, the so-called debt supercommittee is set to begin negotiating additional spending cuts. If the sides fail to compromise—a very real possibility—Wall Street and the public's lack of trust in Washington could deteriorate even further.

Obama's political future is also in doubt. With an overwhelming victory 2008, it was assumed by many that he would be a two-term president. But with low approval ratings and a stagnant economy and job market, his re-election is far from a sure thing.

Merkel and Sarkozy, meanwhile, are left to wait for the next investor panic over European debt. They were able to contain the crisis in smaller European countries like Greece and Ireland. Their new European economic government would not be able to control the crisis if investors lost faith in Italy or Spain.

"There isn't any fellowship right now between lawmakers. What's worse is there are not many people willing to follow them," Jones says. "There is no certainty, both in European capitals and in the U.S. public, that these people will make the right decision. Any element of certainty is wiped out, and that scares investors."

Obama, Barack
Obama administration