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As G20 looms, Greek plans for referendum underscore Obama limits on Eurozone debt crisis
WASHINGTON (AP) ' The surprise prospect of a Greek referendum on a European rescue plan illustrates President Barack Obama's limited ability to push for a swift resolution to a eurozone crisis that could sweep across the Atlantic and threaten the U.S.'s fragile economic recovery.
Prime Minister George Papandreou's unexpected call for a public vote on the aid package, which includes unpopular austerity measures, comes just two days before Obama joins the leaders of the world's largest industrial and developing nations for an economic summit in Cannes, France.
With uncertainty already swirling about the European rescue agreement reached last week, Papandreou's announcement raised anxieties to a new level. The European deal, which still needs work to iron out its finer points, "may have just been unwound by this decision," said Heather Conley, a senior fellow at the Center for Strategic and International Studies.
"This is really crunch time, the stakes could not be higher," she said.
While Obama has asserted that the U.S. will be a leader in the world economy, the White House on Tuesday put the burden on Europe to act swiftly in light of Papandreou's call for a referendum.
"The announcement he (Papandreou) made reinforces the notion that the Europeans need to elaborate further and implement rapidly the decisions they made last week," White House spokesman Jay Carney said. "It remains the case that the Europeans have the capacity to deal with this crisis and they need to implement the very important decisions they made last week to provide a conclusive resolution to it."
The troubled eurozone will be the urgent topic in Cannes, placing much of the summit's attention on German Chancellor Angela Merkel and French President Nicolas Sarkozy, pushing aside Obama's central message to the Group of 20 nations that they need to focus on short-term growth and longer-term debt. Throughout his presidency, Obama has pressed countries with trade surpluses such as China, Germany and Japan to do more to promote domestic spending and more to support global economic growth.
"The only overriding international issue for the G-20 is the continuing crisis in Europe," said Rob Shapiro, a former undersecretary of commerce in the Clinton administration and now chairman of Sonecon, an economic consulting firm.
For Obama, it means walking a fine line between pushing the Europeans to act swiftly and expressing confidence that they will. Obama annoyed some Europeans last month when he declared that the unresolved debt crisis was "scaring the world."
But Obama brings few tools to the G20 meeting to leverage any action on the European debt crisis. Administration officials are playing down any financial role for the United States in helping eurozone leaders create a firewall that would stop Greece's crisis from spreading. However, they noted that the International Monetary Fund, with U.S. financial assistance, could be called on to assist.
A key question during the Thursday and Friday meetings will be how willing China or Japan is to dip into their cash reserves and contribute to the European bailout fund. For the U.S. that proposition is essentially out of the question.
"The Americans don't have any money to put on the table," said Simon Johnson, a former chief economist at the International Monetary Fund. "If they had a little bit of money, they could match the Chinese and that might change the dynamic a little bit. But good luck going to Congress on that one."
On Thursday, Obama will hold individual meetings with Merkel and Sarkozy, this year's summit host by virtue of France's yearlong presidency of the G-20 meetings. Following the summit, Obama and Sarkozy will take part in a ceremony honoring the U.S.-France alliance and meet with members of the military from both countries who participated in NATO's Libya operations.
The summit occurs one year before next year's presidential elections, a campaign the president enters with job approval ratings of 46 percent, according to the latest AP-GfK poll. Obama's precarious political position places him in common company at the G-20. Merkel is facing strains with her governing coalition over the Greece bailout and Sarkozy, also heading for a re-election bid, is trying to turn around his unpopularity.
Underscoring U.S. vulnerability are new unemployment figures for October that will be released Friday by the Labor Department, just as the G-20 meeting is wrapping up. Unemployment in the United States has been stuck at 9.1 percent for three months.
"These are leaders having a difficult time domestically," Conley said.
Find Jim Kuhnhenn on Twitter at www.twitter.com/jkuhnhenn