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In European crisis, Obama sees risks back home

By Jim Kuhnhenn

Associated Press

Published: Thursday, Nov. 3 2011 12:45 p.m. MDT

In this picture released by German Government's press office, US President Barack Obama, right, talks with German chancellor Angela Merkel, prior to the start of the G20 summit in Cannes, France, Thursday Nov, 3, 2011.

Guido Bergmann, AP Photo/German Government

CANNES, France — His political fortunes and his nation's economy at risk, President Barack Obama on Thursday implored European leaders to swiftly work out a eurozone rescue plan, aware of the potential fallout at home if they fail.

Obama, at the French Riviera for a summit of the Group of 20 leading industrialized and developing economies, pledged to be a partner in helping the Europeans cope with the economic emergency. But his aides insisted that Europe's problem, brought on by the threat of a Greek default, was one it had to fix.

Taking his jobs-first message abroad, Obama said the goal was getting people back to work. "That means," Obama said, "we're going to have to resolve the situation here in Europe."

For Obama, an incumbent seeking a second term in a time of economic peril, the stakes in Europe are immense.

Europe is the largest U.S. trading partner, and its intertwined financial institutions mean that a worsening crisis in Europe inevitably would spread across the Atlantic. The timing could not be worse as the weak U.S. economy is beginning to show some signs of life even with the unemployment rate stuck at 9.1 percent.

Obama's economic options and his leverage are limited, and the European debt crisis consumed all attention at the summit meeting.

The Greek government was in danger of collapsing over Prime Minister George Papandreou's call for a public vote on the rescue deal. By mid-Thursday, the word from Athens was that the referendum had been scrapped, but the urgent need for a lasting solution dominated the meeting.

Obama declared his solidarity with French President Nicolas Sarkozy and German Chancellor Angela Merkel, two architects of the debt bailout plan. Obama said resolving the financial crisis is "the most important aspect of our task over the next two days."

But with aspects of the rescue undefined, he added: "We're going to have to flesh out more of the details about how the plan will be fully and decisively implemented."

The plan would cut by half Greece's debt and create a $1.4 trillion firewall to protect other vulnerable European economies. It also would impose strict and unpopular austerity measures on Greece.

A Greek default alone would not necessarily send ripples to the United States, as long as the bailout fund could contain the damage and keep countries such as Italy or Spain from going into a financial swoon.

Publicly, Obama, Sarkozy and Merkel said little about the drama in Greece.

Obama met with Sarkozy for about an hour and said afterward they discussed Greece and "how we can work to help resolve that situation as well." The U.S., he said, "will continue to be a partner with the Europeans to resolve these challenges."

At a meeting with Merkel, Obama spoke of the need to "make sure that not only is the eurozone stable but the world financial system is stable as well."

White House aides said the upheaval in Greece showed the need to put a rescue plan in place regardless of the outcome in Athens. "The steps that need to be taken are clear, again, irrespective of the political personality or situation at any given moment," said Ben Rhodes, a deputy national security adviser.

Obama's participation in the G-20 is more limited than his role in the past four summits he has attended.

Obama's central message has been that economic growth must be balanced. He has called on exporting economies to increase their own domestic demand and for surplus nations to use their reserves to help spur growth.

That push has been overwhelmed by the immediate crisis. Obama is pressing for a quick resolution, but cannot offer any tools of his own to give the Europeans a boost.

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