Greece’s decision to scrap a referendum on new austerity measures added a note of urgency to the G-20 summit meeting that began in Cannes, France, on Thursday. President Obama and other G-20 leaders are trying to prevent the Greek debt crisis from spreading to the rest of Europe and beyond.
Before the G-20 summit formally got under way, Obama met privately with the leaders of France and Germany — Europe’s two biggest economies. They’re also the architects of a continental debt rescue plan.
Appearing with German Chancellor Angela Merkel, Obama said curing Europe’s debt problem is vital for the health of the economy back home.
“This is going to be a very busy two days,” Obama said. “Central to our discussions at the G-20 is how do we achieve greater global growth and put people back to work.”
The debt rescue plan announced last week was cast in doubt on Monday, when Greek Prime Minister George Papandreou called for a public referendum on the austerity measures that plan would require in his country.
After furious pressure at home and from France and Germany, Papandreou backed down Thursday. His government is still on shaky ground, though, and faces a confidence vote Friday night.
U.S. Concern Over Broader Problems
U.S. officials are already looking past the political drama playing out in Athens. Whatever happens in Greece, Mike Froman of the National Security Council stressed, Europe must protect its larger economies such as Italy and Spain from a downward spiral of debt.
“On the Greek issue itself, let me just say the situation there underscores the need to move rapidly towards a firewall that is sufficiently robust and effective in ensuring that a crisis does not spread from one country to another,” Froman said.
In other words, if you can’t fix Greece’s debt problems, at least quarantine them.
Europe is already facing sluggish growth or a mild recession in the months ahead. And London-based analyst Jan Randolph of IHS Global Insight says a runaway debt contagion would make matters worse, and not just for the Europeans.
“Just as we were affected here in Europe by the subprime and the financial crisis of 2008, the tables have turned really,” he said. “Sentiment spreads very quickly like a virus if there’s risk, and certainly risk is being emanated out of Europe to the rest of the world.”
U.S. Playing A Limited Role
The Obama administration has said repeatedly that Europe must take the lead in addressing its debt problems. China could also play a role by investing some of its large cash reserves in a financial firewall.
“Everybody has a stake here in the success of a plan that can deal with the eurozone crisis, and different nations are going to play different roles in supporting that effort,” said Ben Rhodes, the deputy national security adviser.
The United States’ own role does not include any direct financial support for Europe. But the National Security Council’s Froman insists that doesn’t signal a retreat for the U.S.
“Our ability to contribute, our ability to lead and our ability to influence the outcome of these sorts of issues is not tied necessarily to having the American taxpayer pay for every problem,” said Froman.
Indeed, after meeting Thursday morning with Obama, French President Nicolas Sarkozy, the host of the G-20 summit, said the U.S. still had an important role to play.
“We need the leadership of Barack Obama,” Sarkozy said. “We need the solidarity and support of the United States of America.”