Last Updated: Tue Nov 01, 2011 10:18 am (KSA) 07:18 am (GMT)

Obama to focus on Euro woes at G20 summit

President Barack Obama welcomed the EU debt accord last week and is now set to highlight the region’s fiscal troubles at the upcoming G20 summit. (Reuters)
President Barack Obama welcomed the EU debt accord last week and is now set to highlight the region’s fiscal troubles at the upcoming G20 summit. (Reuters)

President Barack Obama, drained by a long showdown with domestic foes and the sluggish U.S. recovery, is heading to Europe on Wednesday to urge leaders to stay steadfast amid their own economic woes.

At the G20 summit beginning in the swish surroundings of Cannes, southern France on Thursday, Obama will test whether his own diminished political heft at home will weaken his economic leverage abroad as he girds for reelection.

Obama has pressed behind the scenes for a strong European response to a regional debt crisis which threatens to spiral into global financial contagion, and despite some market doubts, welcomed an EU debt accord last week.

Lael Brainard, Treasury Department undersecretary for International Affairs, said Obama still believed Europe had the capacity and resources to overcome its economic woes.

“The challenges facing Europe have significant implications for the U.S. economy and for the global economy,” said Brainard. “The EU is a critical anchor of global stability and our single largest trading partner.”

While Obama has been encouraging European leaders from across the Atlantic in frequent telephone calls, his capacity to press for forthright action by his counterparts may be undermined by his diminished domestic political clout.

The president has been unable to take the swift and sweeping action on the slowing U.S. economy that he would like to, after Republicans in Congress refused to pass his $447 billion jobs package.

The White House however rejects the idea that Obama’s weight on the world stage has been hurt by his failure to forge further economic reform at home and argues his policies succeeded in staving off a second Great Depression.

“He carries with him to France the fact that we are pushing our Congress to act on these matters, and he comes as the leader of the largest economy in the world and a great friend and ally of a great many nations,” said White House spokesman Jay Carney.

“We continue to have a significant leading role to play at the G20 and other international fora,” Carney added.

Obama will stress that international role soon after his trip to France, when he flies to his native Hawaii, to host the summit of the Asia Pacific Economic Cooperation forum (APEC) and attends an East Asia summit in Bali.

Soon after arriving in France early Thursday, Obama will hold talks with French President Nicolas Sarkozy and German Chancellor Angela Merkel, his two top interlocutors on the eurozone crisis.

While all sides stress their agreement, and Washington praises the deal reached at a European summit to stabilize the eurozone last week, there are clear hints of divergence on the global economy heading into the G20 meetings.

Obama last week stressed the need for the “full development and rapid implementation” of the European plan amid fears that volatile continental politics could complicate its prospects.

The president has several times worried publicly about the impact that European “headwinds” could have on the fragile U.S. recovery, which is casting a cloud over his own hopes of winning a second term in 2012.

White House officials also on Monday hinted at skepticism over a plan for a tax on financial market transactions pushed hard by Merkel and Sarkozy.

Brainard said that while Washington was aligned with Europe on the goal of halting risky behavior by finance giants, it preferred Obama’s so far not enacted plan for a financial crisis responsibility fee.

“We think that’s an approach that works better than putting the burden on retail investors,” she said.

The idea of a tax on bond and stocks transactions is also opposed by Britain, which hosts Europe’s largest financial hub in London.

Washington is also treading carefully over the idea of a possible large-scale Chinese investment into the revamped euro bailout, amid frequent commentary that the United States is losing power to the rising Asian giant.

Obama is expected to again press China at the summit of developed and developing nations to allow Beijing’s currency, the yuan, to rise to a value which Washington believes will not artificially penalize US products.

Obama will also hold bilateral talks on the sidelines of the G20 summit on Friday with Argentinian President Cristina Kirchner as both sides seek to move on from a rocky period in relations.

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