As he attends the G-20 summit in Cannes, the president has added incentive to prevent European debt from slowing the U.S. recovery
There is no Cannes primary on the U.S. political calendar. But what happens in the south of France over the next two days while President Obama is at the G-20 Summit may have as much to do with his political fate in 2012 as anything happening in Iowa or New Hampshire. From his first meeting with French President Nicolas Sarkozy, which will happen a little after 4 a.m. EDT Thursday, until he departs for home Friday afternoon, the president will be focused on a worsening European crisis that threatens to complicate his own reelection.
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"At this moment, the largest threat to U.S. economic recovery certainly comes from the disorderly unraveling of the European crisis," Domenico Lombardi, president of the Oxford Institute for Economic Policy, told National Journal. Just this week, that unraveling has not been pretty as pessimistic projections on European growth vied with the stunning announcement of a Greek referendum to undo any optimism generated by last week's announcement of a European economic rescue plan.
Lombardi, a former board member of both the World Bank Group and the International Monetary Fund, said the impact of the Greek developments on the already fragile U.S. economic recovery could be stark. "If you think you need to tighten your seatbelt, you are not going to hire more workers. You are not going to go ahead with investment plans and the economic recovery in the U.S. is going to suffer from that and this is just due to the big uncertainty of the Euro crisis."
He predicted an immediate fallout from Europe of "another couple of months of pain, increasing uncertainty, destabilizing effects on the financial markets." This is not news that a president running for reelection wants to hear. And the news didn't get much better Wednesday for the White House, which found itself fending off reports that China will wield more clout at the G-20 meetings because President Hu Jintao will arrive in a better position to offer a financial bailout to Europe than a cash-strapped President Obama could muster. At the White House, press secretary Jay Carney dismissed a potential Chinese offer as "a sideshow," stressing the influence Obama enjoys because of the size of the American economy.
"The United States is still the largest economy in the world," said Carney. "It is still the most powerful nation in terms of its alliances and its influence around the world. And that influence comes in a variety of ways, including the wealth of experience that we have." Repeatedly, he said that Europeans "have the capacity" and the resources to resolve the current crisis, through their own governments or the IMF.
But Carney acknowledged the potential damage to the U.S. economy. "There are all sorts of headwinds that exist ... for the American economy," he said, adding, "Our interest [in Europe] is not entirely altruistic. It's also because we are a very important part of the global economy, and it affects our economy."
As host of the summit, Sarkozy had hoped that the agenda would be far broader than Europe's difficulties. But, Heather A. Conley, who was deputy assistant secretary of State for Europe under President George W. Bush and is now at the Center for Strategic and International Studies, said the summit now will be "fully overwhelmed" by Europe and the Greek referendum, in part because the leaders gathering in Cannes "were caught unawares" by the Greek announcement.
The intense focus on Europe, though, may spare Obama what would have been some unwelcome attention. This is Obama's first overseas trip since the exceedingly messy fight over the debt ceiling in August, a squabble that raised fears in foreign capitals over the ability of Washington to function. That unease became anger at Obama last week when he told an audience in California that the Europeans are going through a financial crisis that is "scaring the world."
"There's certainly concern about U.S. leadership," said Conley, recalling a conversation she had with a top European official after Obama made his comment. "The European official told me, 'Well, don't you think, during the summer when Congress was negotiating this debt ceiling ... don't you think you scared all of us?'"
Those concerns still may be expressed in hallway conversations at the summit. But Lombardi said the Greek developments have pushed them far from the summit agenda. "Europe right now is much more dysfunctional than the U.S.," he said. "So whatever issues the U.S. may have, for the stability of the global economy, now take second place to what is going on in Europe."
He said the focus in Cannes has to be on the Europeans "because they are the immediate, most important source of threat for the global economy and for the stability of the global financial system. President Obama will be less in the spotlight." He added that other leaders no longer view Washington dysfunction as the biggest challenge to economic stability. "There is no doubt that the immediate threat is coming from elsewhere and not from the United States." He said this "relieves pressure on the White House to account for its policies and its fiscal stabilization plans."
Image credit: Charles Dharapak/AP