America, Greece and a world on fire

America has a clear interest in Greece's disaster, but its dearest hope is that the EU can do more to manage the situation – and other global problems.

It took an economic crisis in Greece in 1947 to force the United States to assume world leadership. Now, more than 60 years later, another Greek crisis is showing what the world feels like without US leadership.

In February 1947 the British government – bankrupted by the war and beset by a harsh winter – told America that it could no longer afford to aid Greece, which was on the brink of economic collapse and civil war. A British diplomatic cable at the time recorded a belief in Washington that "no time must be lost in plucking the torch of world leadership from our hands”.

President Truman went before Congress and requested $400 million in aid for Greece, pledging that America would now "support free peoples who are resisting attempted subjugation”. A few weeks later, the US announced the Marshall Plan – a huge program of financial aid, aimed at stabilising the whole of western Europe.

The contrast between then and now is stark. Once again, an economic crisis that began in Greece is threatening Europe. But this time there is no question of America assuming the central role in the management of the crisis.

Of course, the two eras are not the same. Europe is no longer on the point of destitution, as it was in 1947. Nor is there a "communist threat” to focus minds in Congress.

Nonetheless, in 2012 as in 1947, there is a clear American and global interest at stake in Greece. Announcing his plan, George C. Marshall, the secretary of state, argued that America’s own economic health was threatened by chaos in Europe and that the US would do all it could to aid "the return of normal economic health to the world”.

This is a principle that America has applied consistently ever since. The group of US officials who designed the policies to rescue the global economy from the Asian and Russian financial crises in the late 1990s were popularly labelled "the committee to save the world”. It was a pretentious title. But the underlying point was valid. The world needed leadership from Washington – and got it.

So what has changed? A lack of money is a large part of the problem. America spent the equivalent of 5 per cent of its gross domestic product on the Marshall Plan. That is not feasible now. Tim Geithner, the US Treasury secretary, frequently urges his European colleagues to do much more to solve the debt crisis. But, while he can speak softly, he is not carrying a big cheque book.

However, American leadership has not always relied on cash. The "committee to save the world” did not spend a huge amount of money. But it was operating in a different period. Less than a decade after the collapse of the Soviet Union – and with the American economy booming – US policymakers had the credibility and the confidence to lead. In large part, that is lacking today. The financial crisis has taken its toll on America’s ability to persuade, as well as on its finances.

The Obama administration has also taken a conscious decision to focus resources on Asia. The US has decided that the key economic and geopolitical questions of the coming century will be played out across the Pacific Ocean. So Europe and the Middle East will get less American time, money and attention.

The consequences of this shift in emphasis have already been seen in the past year. When Nato intervened militarily in Libya last year, the US took a supporting role – albeit a vital one. And while officials from the EU have camped out in Athens this year, senior Americans have taken a more hands-off approach. Hillary Clinton, the US secretary of state, travels relentlessly. But she visited Greece just once last year, en route to India.

The strategic choice made by the Americans is logical enough. Asia is the most dynamic economic region in the world – and China is the emerging superpower. In theory, it makes sense to shift focus from Europe to Asia.

The trouble is that while the geopolitical and economic challenges presented by the Greek crisis of 2012 are not as dramatic as those of 1947, they are still very serious. If Greece defaults, there is a high risk of a major financial crisis in Europe that spreads across the world.

There are also big strategic issues playing out in the eastern Mediterranean. Across the water from Greece, the whole of north Africa is in ferment. Tensions are rising between Turkey, Cyprus and Israel. Chaos in Greece is already loosening the country’s ties to the EU. China has taken out a long lease on the port in Piraeus and Russian oligarchs may swoop as Greek companies are privatised.

America’s dearest hope is that the management of the euro crisis can be subcontracted to Germany. Then, if Europe gets on top of its debt crisis, the EU can also do more to manage global problems.

The trouble is that the Europeans – and the Germans in particular – keep disappointing. For its own domestic reasons, the German government has been unwilling and unable to provide the overwhelming financial resources that Washington keeps urging Berlin to deploy. The Germans have also proved to be disappointing partners in other global crises. One frustrated Pentagon official exclaimed recently: "I told a German colleague: ‘The world is on fire, where are you going to help?’ And he just shrugged.”

In 1947, when a conflagration in Greece was threatening the world, the fire trucks set off from Washington. In 2012 they are being sent from Berlin and Brussels – late and under-equipped. As a result, the fire rages on.

Copyright The Financial Times Limited 2012.