For Obama to prevail in the presidential election in November, he needs the eurozone crisis to be contained. If it isn't, a deep European recession could dash the slight upturn in the US economy, thus undermining his chances in what is shaping up to be a very close race.

The frustration for Obama is that there is little he can do to affect the outcome of Europe's sovereign debt and banking crisis. He cannot launch another Marshall Plan, as President Harry Truman did in 1948 when Europe was in post-war crisis. There are no funds for bailouts or political will for such largesse. Nor can he offset the drag of a failing Europe with additional large stimulus. Most of what he can do is a series of job-creation incentives that promise modest results in the short term. The US contribution is pretty much pep talks from Treasury Secretary Timothy Geithner. Thus Europe is critical to Obama's prospects but it is on its own in crafting solutions.

If Obama loses the election, his Republican successor will come into office after a divisive campaign, characterised by constant maligning of European approaches to societal challenges. "European socialism" is the pejorative label attached to Obama's management by Mitt Romney, the former Governor of Massachusetts. As the likely Republican candidate, Romney is championing private sector and local government responses over federal funding in healthcare, education, research and development. The result would be a smaller federal government except for the military. Romney and other Republican leaders are vowing to reinstate many of Obama's cuts in Pentagon funding. And they are pledging whatever it takes to deny Iran achieving nuclear weapons capability.

At this stage, hostilities with Iran are not a given under a Romney or an Obama administration. In somewhat different degrees, either president will oversee a diminished American military presence on the continent and in surrounding seas. The premise is that Europe, despite the current economic downturn, has the wherewithal to provide its own defence. But if Western Europe is a "zone of peace", the same cannot safely be said about peripheral areas to the south and east. A diminished American presence and drastically reduced European defence budgets are not without risks.

Furthermore, in a much publicised "pivot", the Obama administration is shifting attention and resources to Asia in belated recognition that China and its neighbours embody the great economic and security challenges of the future. These shifts are the most prominent evidence of a general re-ordering of US global policy to reflect America's relative decline in power and its costly, unsatisfactory interventions in Iraq and Afghanistan.

On the way out is hegemonic initiative. In its place, is a new prominence given to multilateral responses. Favoured will be actions in concert with other major countries and coalitions of the willing. Where possible, responsibility for dealing with problems will be delegated to regional organisations. Some regional alliances are voluntary. Others are in effect imposed by dominant powers. Few regional arrangements are strong and therefore effective in conflict resolution. Where they do work, the focus is local. They are not prepared to take on global challenges of transnational crime, cyber vulnerability and climate change.

If US contributions to European efforts are modest in the short term, the same should not be true in the longer term. Renewal of the US economy is key to sustaining the West's influence and competitiveness. And spurring GDP growth must succeed fiscal reform as the priority goal in the future. A joint drive, highlighted by an EU-US free trade agreement, could do much to stimulate jobs and new sources of growth. Enhanced productivity should be targeted in four areas - energy, infrastructure, healthcare, and education. Needed are better practices and incentives and more research and development. Working together, the EU and the US can best meet the challenges and prospects of China and other emerging powers.

But first, the traumas of the eurozone crisis must be dealt with, and 2012 is shaping up to be a tough year. It will be marked by major country elections, ratings downgrades and $1 trillion of sovereign bond auctions. Within the EU, political responses to the crisis have been belated, partial and subject to increasing pressures from sceptical markets. Economic stagnation is to be feared. If it occurs, the appeal of democracy and a rules-based international system would be seriously undermined.

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