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Danger in the Eurozone

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Kai Ryssdal: President Obama delivered a 35-minute speech to the British parliament today about the Euro-American partnership as a force for good in the world. The word “debt,” perhaps not surprisingly, was uttered exactly once, even as the European Union scrambles to contain its mounting financial crisis.

Commentator David Frum says the European debt story has some familiar American themes.

David Frum: Can’t pay — or won’t pay?

On Monday, European financial markets were rocked by new fears for the future of the Euro currency. The Euro dropped to a two-month low against the dollar. Borrowing costs are spiking not only for Greece, but also for Portugal, Ireland, and Spain. The Italian stock market dropped 3.3 percent in a day.

You can see why markets are frightened. The countries of southern Europe have borrowed enormous amounts in Euros. They must either cut spending or raise takes to pay that debt in today’s tougher economic environment. But voters erupt in protest when governments take steps to balance their budget. The TV cameras focus on the riots in Athens, but the real news is delivered at the ballot box. On Sunday, Spanish voters hammered the governing Socialist party in local elections.

Politicians may believe in the Euro. They may want to pay their debts. But above all else, they want to preserve their hold on office. Default beckons as the easiest way out.

But it’s not just Europe, and it’s not just about the Euro.

Here in the United States, default talk is gathering too. The problem is not that the U.S. cannot pay its debts. Even now, despite all the apocalyptic talk, the debt-GDP ratio remains below the peak levels of the Truman administration.

The problem is that the United States political system cannot produce agreement on the measures necessary to service the debt and then gradually reduce it.

That’s why the debt limit was not raised this month — and why the U.S. Treasury is now scrambling to tap employee pension funds to pay bills. There are plenty of obvious budget cuts and revenue raisers at hand to reduce the U.S. deficit over the medium term. It’s not a matter of can’t. It’s a matter of won’t.

It’s common in U.S. politics to hear comparisons to Greece: “If we don’t do X or if we don’t Y.” It’s a fair comparison — but only if you understand that what we share in common with Greece is not an inability to borrow. It is an ability to govern.

Ryssdal: David Frum was a speechwriter for President George W. Bush. Today he’s the editor of Frum Forum. Next week in this space, Robert Reich. Your views whenever works for you. Send us your comments — click on this contact link.

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