President Barack Obama arrived at a summit of international leaders declaring that the European Union must “flesh out more of the details” of a deal reached last week to contain the region’s debt crisis.
“The most important aspect of our task over the next two days is to resolve the financial crisis here in Europe,” Obama said today during a joint appearance with French President Nicolas Sarkozy before the opening of a Group of 20 summit in Cannes, France.
With Greece’s government teetering on the brink of collapse and Italy under pressure to prove its credit-worthiness, U.S. officials said there is greater urgency to resolve details about the bailout deal, such as exactly how European governments will bolster the main rescue fund.
The turmoil in Greece and uncertainty over the bailout terms “underscores the need to move rapidly toward the full elaboration and implementation of the plan,” Michael Froman, Obama’s deputy national security adviser for international economic affairs, said at a briefing in Cannes. That, he said, includes “having a firewall that is sufficiently robust and effective ensuring the crisis does not spread from one country into another.”
As G-20 leaders were meeting today, Greek Prime Minister George Papandreou abandoned plans to put the European bailout package to a referendum, a move that Sarkozy and German Chancellor Angela Merkel said would be a vote on Greece’s continued participation in the euro.
Stocks rose as Greece moved closer to accepting a rescue and the European Central Bank unexpectedly cut interest rates. The Standard & Poor’s 500 Index added 1.3 percent to 1,253.65 at 1 p.m. in New York and the Stoxx Europe 600 Index surged 2.1 percent.
European leaders reached a broad plan last week to use leverage to increase a bailout fund to 1 trillion euros ($1.4 trillion), reduce Greece’s debt and boost bank reserves to head off the threat of a wave of defaults.
Obama has characterized the European debt crisis as the strongest headwind for the U.S. economy and in September said the euro zone’s financial troubles are “scaring the world.”
Froman said that the direct exposure for U.S. banks is “modest” and “we think we have the tools if necessary” to handle indirect fallout. U.S. banks have written insurance against holders of European government, bank and corporate debt.
Obama, the leader of the world’s largest economy, comes to the summit with limited capacity to shape the response to the greatest current threat to the global recovery.
Obama, who enjoyed greater appeal in many European nations than at home even at the height of his domestic popularity, is hampered in shaping the continent’s response by lingering resentments over the U.S. origins of the 2008 financial crisis, a sluggish domestic economy and political gridlock in Washington.
“U.S. leadership, which in the past might have been helpful in sort of pulling the Europeans together, has eroded,” said Sebastian Mallaby, a senior fellow at the Council on Foreign Relations in Washington.
Sarkozy, the summit’s host, said that Europe must work “hand and glove with the U.S.”
“We need the leadership of Barack Obama,” he said.
The French president also said that he and Obama shared “a common analysis” on a financial transaction tax in that the financial industry should shoulder a share of costs.
The U.S. and Europe will pursue levies on the financial system “in their own way” rather than through a common global tax plan, Froman said.
Obama discussed possible bank fees and taxes in meetings today with Sarkozy and Merkel, Froman said. The EU nations favor a tax on transactions, while Obama has proposed a “financial crisis responsibility fee” to be paid by the largest banks.
“Both share in commonality the idea that the financial sector has an appropriate role to play in contributing” to the costs of crisis cleanup, Froman said. “There is broad consensus” between Obama and the European leaders he’s met with that each will “pursue this in their own way.”
The two-day meeting hosted by Sarkozy aims to stabilize the euro region and the financial world as a whole. Obama said later after a meeting with Merkel that it’s “going to be a very busy two days.”