The immediate danger for Obama is that the political uncertainty that surfaced Monday will probably take months to settle. That could make it harder to address the economic crisis on the continent, potentially undermining the finances of several more governments and rattling global markets.
The result could shake the already fragile American recovery, which Obama has complained is being held back by a weak euro-zone economy that serves as a chief destination for U.S. exports.
A new round of political paralysis that delays Europe’s recovery or calls into question the austerity agreement reached this year to help bail out Greece would probably lead to an immediate slowdown of U.S. economic growth and job creation while confusing bond and equity markets.
“Our economy continues to face some headwinds, and the euro-zone crisis is one of them,” White House press secretary Jay Carney told reporters Monday.
The debate in Europe between spending that would add to already-high government debt or cutting back sharply on public services mirrors the one that has shaped the politics of recovery in the United States.
Obama’s argument to European leaders such as German Chancellor Angela Merkel, the leading voice for austerity, has been that more spending and looser monetary policy would help promote recovery in the short term and could be reined in later.
Obama’s views resonate
That message is resonating in European politics, most notably in the Sunday election in France of Francois Hollande, the first Socialist Party candidate to ascend to the presidency since Francois Mitterrand left office in 1995.
The course for Europe will now be drawn in part by the next Greek government, whenever one emerges, and Hollande, who has outlined a number of ways short of new spending to ease the economic hardship that has resulted from austerity measures across the continent.
Obama will have a say in the discussion as early as next week, when leaders of the Group of Eight industrial economies meet at Camp David.
There he will probably find himself playing the role of intermediary between Hollande and Merkel, two leaders who, like Obama, have cool, pragmatic temperaments, a contrast to the unpredictable Sarkozy.
At issue will be not only France’s fiscal approach but also whether European leaders will hold Greece’s next government accountable for the agreement negotiated in February that allowed for a rescue package of $171 billion in emergency loans.
Greece’s two main parties lost badly at the polls for supporting that deal and the austerity measures it entailed, and Carney noted Monday that “the Greek people have made many sacrifices to address that country’s economic crisis.