Lewis, Flora
December 1981
Foreign Affairs;1981 Special Issue, Vol. 60 Issue 3
In Europe, the United States president Ronald Reagan's assertions of stoutheartedness and its images of danger to justify a vast but not clearly coherent military program seemed like bravura, the kind that could bumble into disaster. More missiles of all kinds, weapons as the tender of diplomacy, reluctance to engage the adversary in earnest negotiation, reverberated as an increased risk of war. That provoked the upsurge in neutralist and pacifist sentiment and a degree of anti- Americanism. The plan to deploy cruise and Pershing II missiles in Europe to counter Soviet SS-20s became the magnetic pole to attract and organize an outpouring of these feelings, with huge demonstrations in West Germany, Holland, Italy, Britain. Europeans had complained about former U.S. President Jimmy Carter's "benign neglect" of the dollar, but President Reagan's over-muscular dollar hurt even more and they began to talk of a "third oil shock," the added cost of paying fuel bills in expensive dollars. There was no particular quarrel with President Reagan's economic program at first. Whether they believed in his methods or not, the Europeans hoped for a U.S. recovery to ease their own difficulties. But when Reagan's economics produced exorbitant interest rates, they were affected and complained bitterly. To fight inflation at home, the Reagan Administration severely curtailed the supply of credit, driving up its price. This attracted a flow of money from abroad to take advantage of high U.S. interest rates and forced a relative devaluation of European currencies as the dollar floated upward.


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