U.S. President Ronald Reagan, who defeated Carter largely by promising to restore American power overseas and improve the nation's stagnant economy, alarmed many Europeans with his escalation in military spending and plans to develop the "Star Wars" antimissile system, which they feared would endanger the delicate balance of power with the Soviets. As U.S. corporate profits and the stock market rose in the mid-1980s, the symbiotic relationship between America and Europe grew even more problematic.

The U.S. government cut taxes, and then financed budget deficits by borrowing money overseas — including from European bankers. America's status as a debtor nation made it more difficult for Reagan to impel European countries to support U.S. efforts to exert economic pressure on the Soviets. French President Francois Mitterrand once ranted to a Washington Post correspondent in angry frustration about Reagan's strident stance toward the Soviet Union, which Europeans saw as an important source of oil and natural gas, even as they feared its military might.

In the latter part of the 1980s, George Shultz, the new, less hawkish U.S. secretary of state, did much to improve U.S.-European relations. He also negotiated a treaty with the Soviet Union, signed by Reagan and Soviet leader Mikhail Gorbachev in 1987, that eliminated the arsenals of intermediate-range nuclear missiles that would have turned Europe into a wasteland. Ultimately — at least as his American admirers saw things — Reagan's efforts to bleed the Soviets dry with an expensive arms race may have benefited Europe. By the late 1980s, with the Soviet Union on the brink of economic collapse, communist regimes in Eastern Europe began to unravel as well. When Gorbachev refused to send Soviet troops to prop them up, the Iron Curtain finally collapsed.

>> NEXT SLIDE >>