Europe debt crisis tied to US election, economic recovery; GOP taunting about euro socialism

WASHINGTON Iowa and New Hampshire have had their say. Next up are South Carolina and Florida, with Germany and France lurking in the background. What happens across the Atlantic with Europes troubled economies could rain down political thunderclaps across the United States. If Europe tanks, it could take the fragile American economy with it, undermining President Barack Obamas re-election hopes and giving Republicans more opportunity to attack him.

The outcome of U.S. elections may depend in part on the ability of German Chancellor Angela Merkel and French President Nicolas Sarkozy, leaders of the continents two biggest economies, to find a long-term fix for Europes debt woes.

Despite some progress, European politicians havent found a way to stop the economic misery from infecting other nations that share the euro as their currency. They will try again at a European Union summit Jan. 30.

If they succeed, it could give a boost to the U.S. economy, given that 27 percent of all U.S. exports now go to Europe, and to Obamas chances for a second term. His re-election prospects have always been tied closely tied to the health of the economy.

Should the Europeans fail, it could hurt trade, consumer confidence and possibly even shatter the euro, gumming up much of the worlds banking system in the process.

In the U.S., that would play into GOP criticism of Obamas economic stewardship and fuel Republican assertions that the president wants to make America, well, more like Europe.

That is the central message of presidential candidate Mitt Romney, who has won the Iowa GOP caucuses and the New Hampshire primary. The GOP front-runner emphasizes his business background and his four years as governor of Massachusetts to promote his claim that he can create jobs.

The U.S. outlook is improving, helped by the creation of 200,000 jobs in December that dropped the jobless rate to 8.5 percent. Some 1.5 million jobs have been added in the past year and the pace seems to be quickening. Manufacturing and consumer spending are looking up and housing markets may have bottomed.

Yet the full brunt of Europes debt crisis has not been felt. Up ahead: an expected further tightening of credit and a retrenchment by European banks. Austerity measures along with a bank pullback could prove to be a huge drag on growth in Europe and the United States.

Time would suggest the crisis is deepening, said Heather Conley, a Europe expert at the Center for Strategic and International Studies. The Obama administration is very concerned about, in its view, Europes lack of ability to get hold of this problem and handle it decisively.

Our economies are so interlinked and intertwined that whatever happens in Europe has a significant impact in the United States, and whatever happens in the United States directly affects Europe, Conley said.

A failure by Europe to get its economic house in order could bring told-you-so taunts from Republicans, who claim Obama is steering the U.S. on a course toward European socialism.