'Encouraged' Obama seeks G-20 results on economy

By Ben Feller

Associated Press

Published: Tuesday, June 19 2012 1:00 p.m. MDT

President Barack Obama takes his place with other leaders for the Family Photo during the G20 Summit, Monday, June 18, 2012, in Los Cabos, Mexico. From left, Indonesian President Susilo Bambang Yudhoyono, U.S. President Barack Obama, German Chancellor Angela Merkel, Chinese President Hu Jintao, Indian Prime Minister Manmohan Singh.

Carolyn Kaster, Associated Press

LOS CABOS, Mexico — President Barack Obama, closing his final foreign trip before the November election, sought to head home with fresh commitments Tuesday that Europe was racing toward a plan to keep its economic union afloat and its allies from being sucked into recession.

Leaders of the world's other established and emerging powers wanted something from Obama, too — an assurance that the U.S. economy won't plunge into an abyss at year's end, when tax hikes and big spending cuts are due to kick in unless lawmakers and the White House cut a deal.

All sides at the Group of 20 summit seemed intent on sending confident signals to jittery markets and unhappy electorates. The European mess of high debt, high borrowing rates and high unemployment poses huge spillover risks to the American economy and Obama's political future.

Underscoring the stakes, Obama broke from the main summit Tuesday for a brief meeting with leaders from Britain, Germany, Italy, France, Spain and the European Union.

Obama also met privately Monday with German Chancellor Angela Merkel. Following their talks, he sent word through a spokesman that he was "encouraged" about Europe's path. Merkel proclaimed that the European Union nations were determined to solve the crisis through debt cutting, growth and cooperation.

"That reached very attentive ears here," Merkel said from the summit, held in this resort region along the Pacific coast of Mexico.

Obama was immersed in a second day of summit talks before meeting separately with Chinese President Hu Jintao and holding a news conference. He was to be back in Washington early Wednesday, where a fierce re-election campaign and a slumping U.S. jobs market await him.

Despite the words of unity, European leaders showed signs that they have heard enough about their troubles, particularly from Americans. Memories linger of the 2008 financial crash that was borne in the United States and destroyed jobs and wealth.

"The eurozone has a serious problem, but it is certainly not the only imbalance in the world economy," Italian Prime Minster Mario Monti said Tuesday. He said the United States' own financial problems were mentioned in G-20 talks "by almost everybody, including President Obama."

European Commission President Jose Manuel Barroso took an aggressive tone with reporters on Monday, also pointing some blame at North America and saying "Frankly we are not coming here to receive lessons in terms of democracy."

Europe's ability to turn around its fortunes fast will have direct bearing on whether Obama wins a second term. The bigger the drag from abroad, the harder the job growth in the United States.

Obama said all countries must contribute so "the economy grows, the situation stabilizes, confidence returns to the markets."

Although the foreign gatherings allow Obama to show off statesmanship, every day spent away from the United States and a direct focus on jobs in America quietly gives headaches to his campaign aides.

While Obama was in Mexico, his Republican competitor, Mitt Romney, was wrapping up a campaign bus tour through the heart of America.

Obama was spending much of Tuesday on the economic crisis after taking care of some unrelated diplomatic business — his first meeting with Vladimir Putin since the former Russian president returned to the job this year. The leaders met for two hours Monday, in talks dominated by a bloody Syrian conflict that has deeply divided Russia and the U.S.

Central to the G-20 debate is how nations can boost jobs and consumer demand without sinking deeper into debt. Obama has implored governments to spend and grow, not just cut.

A draft of the leaders' final statement shows they want assurances that the United States won't take a deep plunge and drag them down as well.

The statement says the U.S. will "calibrate" its attempt to rein in debt and spending "by avoiding a sharp fiscal contraction in 2013."

That's a reference to a big threat to economic growth in the United States after the November election: the expiration of George W. Bush-era tax cuts and a scheduled round of automatic spending cuts that could send the nation back into a recession.

While the White House and lawmakers agree that they must act late this year or early next year to avoid such a "fiscal cliff," there is no path yet on how to avoid it.

Obama's political move has been to constantly show confidence in Europe's ability to solve its problems, but prod its leaders to move and chide them for not doing more sooner. Now, White House aides talk more positively about the direction of the debate, as they see it, toward the role of government in spurring economic growth.

"I think if you look at the shift in the focus, you'll see a very strong focus on supporting demand ... recognizing that economic conditions have deteriorated," said Lael Brainard, the Treasury Department's undersecretary for international affairs.

"This is very important to the Europeans in particular," she said. "And yes, we have heard it from German colleagues."

Associated Press writers Anne Gearan and Michael Weissenstein contributed to this report. Follow Ben Feller at http://twitter.com/BenFellerDC

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