President Barack Obama devoted his final scheduled pre-election trip abroad to pressing foreign leaders to stimulate a slowing global economy as the European debt crisis deepened.
The U.S. president, in Los Cabos, Mexico, at a Group of 20 summit, prodded leaders, including Germany’s Angela Merkel, to find a consensus on sovereign debt as financial markets escalated pressure on Spain. Today, he meets with Chinese President Hu Jintao amid signs the world’s second-largest economy is decelerating.
Lael Brainard, Treasury undersecretary for international affairs, told reporters there was a “notable shift” in sentiment among the governments toward a greater emphasis on stimulating growth over austerity, the Obama administration’s position. Still, no concrete measures emerged during the day.
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 forced Greece, Ireland and Portugal to call for sovereign rescues for the first time since the euro’s creation.
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 threaten his political prospects.
“We are going to be very busy,” Obama said after meeting early yesterday with the summit host, Mexican President Felipe Calderon. “This will be a productive summit.”
In addition to Calderon, Obama met on the sidelines of the summit with Merkel and Russian President Vladimir Putin, with whom he discussed violence in Syria and other issues.
“We agreed on the need for a cessation of the violence,” Obama told reporters after the Putin meeting yesterday.
“We have found many common points on this issue,” Putin said, adding that the two sides will continue discussions.
Putin and Obama also talked about the U.S. missile defense program, a source of friction between the two countries, and the expansion of commercial ties, which are “far below” where they should be, Obama said. He called the two-hour talk “candid and thorough.”
Earlier in the day, Obama welcomed the results of the Greek elections as a “positive prospect not only for their forming a government, but also working constructively with their international partners.”
Obama met with Merkel for 45 minutes before the formal G-20 sessions began and was scheduled to see her again in the evening, at a session also with the leaders of Britain, Italy, France, Spain and officials from the European Union.
While pressure is building on Merkel to be more accommodating to European nations enveloped in the debt crisis, she said in the morning that the new Greek government shouldn’t be granted leeway on the terms of its international bailout.
“The important thing is that the new government sticks with the commitments,” Merkel told reporters. “There can be no loosening on the reform steps.”
Brainard said at a news conference later in the day that European leaders are prepared to find other ways of easing the burden on Greece, saying “we can expect” flexibility on the timetable for meeting reform goals.
With international markets looking for an indication of how European leaders plan to act, the stakes at the summit, which concludes today, are high because of a global economy at a “very dangerous moment,” said World Bank President Robert Zoellick.
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 problem 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 when European leaders hold a summit June 28-29. America’s ability to force European leaders and institutions to take action is limited, he said.
Leaders may use the Los Cabos summit to agree to boost the $430 billion firewall the International Monetary Fund announced in April, Calderon said. “I estimate that there will be a larger capitalization than the pre-accord reached in Washington, which will be finalized here, but I don’t want to speculate by how much,” he told reporters June 16.