Obama Says Europe Must Act As Crisis Puts Drag On U.S. Recovery

 

President Barack Obama pressed Europe’s leaders to take “decisive” action to stimulate growth while dealing with debt, saying the euro-zone crisis is putting a serious drag on the U.S. economy.

President Barack Obama speaking about pushing Congress to pass his proposals to create jobs and improve the economic standing of middle class families. Photographer: Jewel Samad/AFP/Getty Images

President Barack Obama at the University of Nevada Las Vegas on June 7, 2012. Photographer: Jewel Samad/AFP/Getty Images

“The sooner they act, the more decisive and concrete their action, the sooner people and markets will regain some confidence,” Obama said at a White House news conference.

The president also cited Europe’s financial woes to pressure Congress for action on the portion of his package of jobs measures that have been stalled since he proposed them last September.

A U.S. slowdown would deal a blow to Obama’s bid for re- election and reinforce Republican Mitt Romney’s main line of attack against the president. A Labor Department report a week ago showed only 69,000 new jobs were created by employers in May and the unemployment raterose to 8.2 percent, up 0.1 percent.

With the state of the economy the dominant issue in the campaign, most national polls show Obama and Romney tied for support among Americans.

Obama repeated the prescription for the 17-nation euro zone that he outlined when he met with other leaders from the Group of Eight countries May 18 and 19.

 

U.S. Support

“Even as European countries with large debt burdens carry out necessary fiscal reforms, they’ve also got to promote economic growth and job creation,” he said.

European leaders including German Chancellor Angela Merkel and French President Francois Hollandeare “working to put in place a growth agenda” along with “responsible fiscal plans.”

“They have America’s support,” Obama said. “Their success is good for us.”

In focusing on Europe, Obama is seeking to balance his domestic political priorities with the prospect that more pressure may be counterproductive.

“The Merkel government is really getting sick of all the complaining and lecturing from the Obama administration,” Fredrik Erixon, head of the European Centre for International Political Economy in Brussels, said by phone before Obama spoke.

Obama said the U.S. financial system can absorb “shocks” better because of reforms put in place since he took office. Still, he said, if Europe goes into a recession, “that means we’re selling fewer goods, fewer services, and that is going to have some impact on the pace of our recovery.”

‘Diminishing Returns’

Federal Reserve Chairman Ben S. Bernanke told a congressional committee yesterday that policy makers will discuss later this month whether to do more to spur growth in the U.S., though he said the steps they could take may have “diminishing returns.”

Treasuries rose for a second day amid concern Spain may become the fourth of the euro-bloc countries to require emergency aid. The 10-year note yield dropped four basis points, or 0.04 percentage point, to 1.60 percent at 11:10 a.m. New York time, according to Bloomberg Bond Trader prices.

The Standard & Poor’s 500 Index rose 0.1 percent to 1,315.74 at 11:22 a.m. New York time, after declining as much as 0.6 percent earlier. It has risen 3 percent this week.

Obama’s remarks came ahead of a weekend talks among euro zone finance chiefs on a potential assistance request from Spain to shore up the nation’s lenders.

Spanish Banks

A bailout for Spain, reeling from a recession and the bursting of a property bubble, may dwarf previous rescues in the effort to stem the turmoil that began with Greece’s disclosure in 2009 that its finances were in worse shape than was previously known.

Obama said today it is in “everybody’s” interest for Greece to stay in the euro zone and he warned Greece that its hardships will increase if the nation exits.

Obama said Congress should adopt major portions of the $447 billion jobs plan he offered in September that the administration says would put construction workers back to work upgrading roads and bridges, teachers back in the classroom and police and firefighters on the job.

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