Attention Deficit Disorder in Europe

One thing not being addressed by President Bush in his visit abroad: the effect of America’s ballooning deficit on the European economy. As America has fallen deeper and deeper into debt, the value of the dollar has plummeted against the euro; the dollar has lost 37 percent against the euro since 2002. Bush needs to restore confidence that America can manage the global financial system — but he is saying little about the dollar these days. European and U.S. economists alike are concerned that the falling dollar and the growing deficits are increasing the risk of financial instability in the United States.

Europe is America’s largest trading partner, exchanging over $1 billion in goods per day. Europe’s net direct investment in the US is over $1 trillion, so it is hard to blame Europeans for being worried about their investments.