U.S. President Barack Obama expressed confidence that European leaders will reverse the deepening crisis over sovereign debt on the continent.
Euro zone leaders showed “a heightened sense of urgency” during the Group of 20 summit of leaders of major industrialized nations in Los Cabos, Mexico, Obama said at the conclusion of the meeting.
During the next several weeks, euro zone leaders will “paint a picture of where we need to go” and “take some immediate steps” to demonstrate resolve to financial markets, the president said. “If people have a sense of where they are going, that can provide confidence break the fever.”
Obama devoted his final scheduled trip abroad before the election to pressing foreign leaders to stimulate growth and urging European leaders to take decisive action on the continent’s sovereign debt crisis. He met on the sidelines of the summit with euro zone leaders, as well as Russian President Vladimir Putin and Chinese President Hu Jintao.
Obama said he discussed the violence in Syria with Putin and Hu, both of whom have acted to protect Syrian President Bashar al-Assad in the United Nations Security Council.
He said the Russian and Chinese leaders recognize the situation in Syria “does not serve their interests” though he stopped short of saying they are ready to abandon Assad.
Treasury Secretary Timothy Geithner said earlier in the day that European leaders plan steps to help the region “grow faster.” Europe is seeking “a framework” for “a stronger set of institutions,” including a banking union, before a European summit later this month, he said.
Geithner said the European Union summit June 28-29 will be “critical.”
After a victory in Greek elections on June 17 for political parties that support a European bailout and austerity plan, financial markets turned on Spain as the summit opened. Spanish 10-year bond yields leaped above the 7 percent level that pushed Greece, Ireland and Portugal to call for sovereign rescues for the first time since the euro’s creation.
Spanish bond yields declined and global stocks rose today after the Spanish government met its target at a bill auction and the U.S. Federal Reserve prepared to meet on stimulus measures.
The MSCI All-Country World Index added 1.2 percent at 4 p.m. in New York and the Standard & Poor’s 500 Index (SPX) climbed 1 percent to 1,357.98, with both reaching the highest level in more than a month. The yield on Spain’s 10-year note dropped 12 basis points to 7.04 percent.
In an election in which Obama is running against discontent with the economy as much as Republican challenger Mitt Romney, the perils to the global economy may hurt his political prospects.
Obama met with German Chancellor Angela Merkel for 45 minutes yesterday before the formal G-20 sessions began. He and Merkel met again today on the sidelines of the summit together with leaders of the U.K., Italy, France and Spain, as well as European Union officials.
Obama met separately with Hu amid signs that China’s economy, the world’s second-largest, is decelerating. The agenda included U.S. complaints that China needs to allow its currency to appreciate further.
While pressure is building on Merkel to be more accommodating to European nations enveloped in the debt crisis, she said today that the new Greek government shouldn’t be granted leeway on the terms of its international bailout.
Obama has called Europe’s banking and growth crisis a “cloud” hanging over the U.S. economy. Administration officials said they didn’t expect the summit to resolve the sovereign debt issue that has led to high borrowing costs and economic contraction in much of Southern Europe.
“Let me also just underscore this isn’t a meeting where we expect Europeans to make decisions about Europe,” said Michael Froman, deputy national security adviser for international economic affairs, in a briefing for reporters in Washington on June 15.
Froman said concrete steps are more likely at a European summit June 28-29. The ability of the U.S. to get European leaders and institutions to take action is limited, he said.
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