"Europe is going through a financial crisis that is scaring the world," Barack Obama said this week. For that read, it's scaring the hell out of me. Barely a week goes by now when the president of the world's most powerful nation doesn't deliver a message to Europe to get its house in order, his comments betraying anxiety about his re-election prospects if the global economy continues to flounder on the rocks of European debt and US growth fails to pick up before next November.
His treasury secretary, Tim Geithner, has been similarly outspoken, even travelling to the European finance ministers' meeting in Poland two weeks ago to urge more action.
In addition, his fingerprints were seen all over the suggested rescue plan for the euro which emerged from last weekend's IMF meeting in Washington, reportedly involving an idea to write off half of Greece's debts, recapitalise the continent's banks and leverage up the eurozone bailout plan to a war chest of €2 trillion or more.
The clue was in another of Obama's comments this week when he said that Europe had "never fully dealt with all the challenges to their banking system", revealing that the White House and, for that matter Wall Street, believes that Europe needs to come up with a more convincing show of intent to shore up their part of the global financial system.
It's been brewing for a while. As protests raged across Greece, the euro debt crisis deepened and Wall Street historian Charles Geisst had a worrying sense of deja vu.
Geisst, author of Wall Street: A History and a finance professor at Manhattan College, was taking part in a panel discussion for American Banker magazine with William Rhodes, the financier who in the 1980s led a team attempting to tackle the developing nations debt crisis.
After the discussion he talked to Rhodes about his experience of the crisis. Thirty years ago, countries across the world were brought to the edge of collapse by crippling debts, austerity measures were imposed, riots broke out, world opinion rounded on bankers, governments and the International Monetary Fund as massive lending turned to major defaults. It all sounded painfully familiar.
In August 1982 Mexico defaulted on its debt, sparking financial chaos throughout South America. "The crisis was hitting European banks hard," said Geisst. But Rhodes told him US banks were more exposed than people realised. "Somehow Paul Volcker [then chairman of the Federal Reserve] managed to keep things very hush-hush. It's not like that now. The world has changed." Yet the fear and panic remain.
The current debt crisis may be further away geographically, but for the US stock markets it might as well be happening on Wall Street. They react to every twist in the ongoing eurozone credit crisis, rising and falling on fact and rumour alike. "We've become very international," said Geisst.
In large part the US's nervy reaction to the euro circus is being driven by technology. The two markets have been close for decades but electronic trading has sped up how they react to each other and tied them closer together. At the same time, US and European banks are more heavily invested in each other. "Exports to the US over 20 years have probably not changed that much, but the exposure of US banks to European banks has rocketed as the US banks have tried to get access to other markets to increase their yields," said Paul Dales, US economist at Capital Economics.
Dales calculates that between 1994 and 2006 the correlation between the US's S&P 500 index and London's FTSE and Eurofirst measure of continental European stock markets was 0.88. A correlation of 1 would mean they moved in tandem, a correlation of 0 would mean they had no relationship. Between 2007-2011 the correlation had risen to 0.93.
Simon Johnson, professor of Entrepreneurship at MIT Sloan School of Management and former IMF chief economist, tracks the new degree closeness of this unhappy union back to the 2008 financial crisis: "They've been close since the financial crisis developed leaving European banks holding lots of US junk."
Johnson said that the current jitters reminded him of the Asian financial crisis of 1997-1998, when the collapse of Thailand's currency sparked panic across the region, riots in Indonesia and fears of global contagion. Oil prices collapsed, sparking a crisis in Russia, contributing to the collapse of giant US hedge fund Long Term Capital Management and panic around the world. "A lot of what happened then was more about perception than reality," said Johnson. He sees the same issue this time. "There's a pattern of euphoria followed by depression followed by euphoria."
In many ways this crisis is worse than the Asia crisis. The world is more entwined, the risk of contagion greater, the economies being affected larger and more resistant to change and outsider pressure. It is little wonder then that Obama and Geithner have felt the need to be so vocal. Neither is it surprising that many European countries are unwilling to listen to take lessons from a US that, frankly, has shown little appetite for fiscal prudence in recent years.
The US markets plunged again on Friday, despite the German parliament agreeing to beef up the European Financial Stability Facility (EFSF) bailout fund. A bigger EFSF is a stop-gap measure, Johnson warned, not a solution.
Mohamed El-Erian, chief executive of Pimco, one of the world's largest bond fund managers, agrees: "The vote was an important step but it is only a small step along a still very long and difficult journey; and the destination remains uncertain. Germany's vote will only be materially meaningful if supported by a number of other urgent steps and, importantly, a clearer vision as to what the politicians wish the eurozone to look like in five years."
Johnson does see one possible way out, one with a historic parallel that may make anti-American euros shudder. "The best parallel is with the US at its foundation. When Alexander Hamilton realised the country needed fiscal union," he said.
In 1790 the first US Treasury secretary convinced the new federal government to take on the debts incurred by individual states in their revolutionary war against Britain. His opponents argued some of those states had been profligate and didn't deserve a bailout. Taking on that debt, wrote Hamilton, was "the price of liberty". Some 220 years later it is the European Union that is being pulled apart by debt, but it's battering the US in the process. And as the crisis rumbles on, there is no sign yet of a leader like Hamilton to take control and determine the price of liberty, let alone who will pay it. Obama is hoping Europe finds the right leadership soon.