Obama hopeful that European leaders will take steps to rescue financial system

Amid growing fears that Europe’s debt crisis will further stunt U.S. economic growth, President Obama emerged from two days of talks with world leaders Tuesday expressing cautious optimism that European leaders will take stronger action to rescue their foundering financial system.

Obama acted at times as a mediator during a Group of 20 summit that featured moments of frustration, but White House officials said they are hopeful that a greater consensus has developed around more robust changes in advance of a European summit next week.

Yet Obama aides offered no examples of specific steps that will be implemented, despite the heavy pressure applied by Obama and other international leaders. And at a news conference after the summit, the president cautioned that the “challenges in Europe will not be solved by the G-20 or the United States.”

“Our friends in Europe clearly grasp the seriousness of the situation and are moving forward with a heightened sense of urgency,” he added.

The leaders of the four European members of the G-20 — Britain, France, Germany and Italy — pledged to work together to ensure that debt-ridden Greece remains part of the euro currency zone; implement stronger integration and safeguards in Europe’s banking system; and take steps to boost economic growth in the near term, according to a communique.

The crisis remains a formidable threat to the United States’ fragile economic recovery and represents a challenge to Obama’s reelection bid, which hinges largely on voters’ assessment of his economic record.

Asked whether a deteriorating Europe could cost him the election, the president said that “it’s fair to say that all these economic issues will potentially have some impact on the election, but that’s not my biggest concern right now.”

His administration’s handling of Europe became campaign fodder recently when an economic adviser to Republican challenger Mitt Romney published an editorial in a German newspaper criticizing the administration for pushing Germany to help prop up Greece.

Obama’s campaign criticized that adviser, R. Glenn Hubbard, who was an official in the George W. Bush administration, for second-guessing the president while he was abroad. On Tuesday, Obama reiterated that rebuke.

“We have one president at a time and one administration at a time. Traditionally, the notion has been that America’s political differences end at the water’s edge,” he said. “I’d also suggest that [Hubbard] may not be familiar with what our suggestions to the Germans have been. Back home, there is a desire to superimpose whatever ideological arguments that are taking place back home onto a very complicated situation in Europe.”

A summit dinner Monday evening ran long after international leaders pressured the Europeans to move more firmly to fix their problems. A post-dinner meeting Obama had arranged with his European counterparts was canceled, purportedly because the leaders were too tired.

Obama rescheduled that discussion for Tuesday, however, and U.S. officials said the Europeans showed resolve to take firmer action.

“What the president tried to do was try to give the Europeans a chance to describe their strategies to the rest of the world, make sure the rest of the world understands that so they will be more supportive of the efforts and not be left with too much uncertainty about what Europe’s going to do,” said a senior administration official, who spoke on the condition of anonymity to be frank about the private meetings.

But tensions reared again Tuesday when British Prime Minister David Cameron reportedly angered French President Francois Hollande by making a snarky comment about Hollande’s plan to implement a tax on wealthier residents, which Cameron joked would drive those high earners and their businesses to Britain.

“We will roll out the red carpet, and we will welcome more French businesses which will pay their taxes in Britain. That will pay for our public services and our schools,” Cameron told business leaders, according to Agence France-Presse.

A frustrated Hollande, who won office this year after promoting stimulus spending to spark growth, reacted by telling reporters that “everyone should take responsibility for what he says. I do. At a time when European solidarity should be strong, I will do nothing to breach it.”

Still, White House officials said progress was made in bridging the divide between Holland’s pro-growth agenda and the austerity campaign that German Chancellor Angela Merkel has championed. Obama has paid special attention to Merkel, speaking with her one on one during the Group of 8 summit at Camp David last month and repeatedly talking to her by phone.

The administration official said that Merkel understands “how severe, how serious the challenges are right now. And they know they’re going to have to do more. What they’re doing is trying to lay out elements of a strategy to work.”

The idea of employing short-term stimulus measures has become more urgent as growth has slowed not just in Europe, but in China, India, Brazil and the United States. The message dovetails with Obama’s domestic agenda, in which he has proposed new spending projects in the short term to boost employment.

“The tone has been very different,” the senior administration official said. “There was a long period many times over 21 / 2 years when we came saying the basic lesson of the fiscal crisis was to keep focused on making growth stronger . . . but a lot of people said they wanted to focus on the long term. But there has been a very welcome recognition of a significant change in tone by everyone now. That’s a good thing, an important thing. You’re seeing policies move.”

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