President Obama’s effort to contain the European debt crisis is taking on greater economic and political urgency as Europe emerges as the greatest threat to the faltering U.S. recovery and, potentially, a significant hurdle to his reelection prospects.
At the Group of 20 summit in Los Cabos, Mexico, this week, the president is expected to press European leaders to do more to stabilize their banks, stimulate job growth and prevent debt-stricken Greece from dropping out of the euro zone.
Explore the factors that work to spread a financial crisis and how they are linked in Europe.
President Barack Obama arrived in Mexico for the G20 Summit this week. The president is expected to push Europe to take more decisive action to deal with its debt crisis.
Failure to find a solution in Europe could plunge the world deeper into recession, according to Obama administration officials and many independent economists.
“Obviously, the situation in Europe will be central in leaders’ minds when they arrive in Los Cabos,” said Mike Froman, deputy national security adviser for international economics, at a White House briefing Friday. “It’s the dominant risk to the global economy at the moment. And Europe is our largest trading partner and a key part of the global financial system, and therefore it’s very important to the United States.”
A May jobs report showing more anemic growth than most economists had anticipated indicates the U.S. economy is newly vulnerable to what Obama last week called “head winds” being produced by the European crisis. With most Americans deeply uncertain about their financial circumstances and the president’s economic stewardship, a turn for the worse in Europe could bring political head winds for him, too.
“The stakes are so high,” Froman said about the economic dangers. He could have easily been talking about the president’s political fortunes.
The European crisis is worsening at a moment when the domestic economy has emerged even more clearly as the defining issue of the 2012 presidential campaign. Obama held a rare news briefing at the White House last week to underscore the urgency of the situation across the Atlantic, where drastic reforms, pushed primarily by German Chancellor Angela Merkel and meant to reduce high government debt, threaten to choke growth and worsen the crisis in the short term.
This week, Obama and his Republican opponent, Mitt Romney, delivered dueling speeches on opposite sides of Ohio intended to frame the election as a stark choice of how to lead the United States back to prosperity. While Romney argued that Obama’s spending and regulations have gotten in the way of job creation, the president said Romney’s plan for tax cuts for the wealthiest Americans and austerity would cripple growth and decimate government programs that strengthen the middle class, such as education, job training and infrastructure improvement.
Obama’s ability to speak frankly about the European crisis is complicated by his dual roles of chief executive and candidate. It would suit Obama’s political message to convey sharply to European leaders what he believes they should do to shore up their economies. He comes down squarely on the side of growth and stimulus — on the opposite side of Merkel’s austerity campaign.