Bloomberg News

Obama Calls Accord on European Debt ‘Important First Step’

October 27, 2011

(Updates with Obama opinion article in Financial Times in 12th-16th paragraphs.)

Oct. 27 (Bloomberg) -- President Barack Obama said European leaders took an “important first step” in resolving the region’s debt crisis with a deal to expand a bailout fund.

“I was very pleased to see that the leaders of Europe recognize that it is both in Europe’s interest and the world’s interest that the situation is stabilized,” Obama said today before a meeting with Czech Prime Minister Petr Necas at the White House.

“It will definitely have an impact on us here in the United States,” Obama said in his first remarks on Europe’s sovereign-debt crisis since the agreement was announced last night.

Obama and Treasury Secretary Timothy F. Geithner had urged Europe to do more to stem the two-year-old sovereign-debt crisis that began in Greece and threatens larger economies on the continent, such as Italy, Europe’s third-largest.

The plan includes increasing a rescue fund to 1 trillion euros ($1.4 trillion), persuading bondholders to take 50 percent losses on Greek debt, a recapitalization of European banks and a potentially bigger role for the International Monetary Fund in strengthening the bailout fund.

Europe’s currency, stocks and bonds rose following the agreement. The S&P 500 jumped 3.4 percent to 1,284.59 at 4 p.m. in New York, sending its October gain to 14 percent and erasing its 2011 loss. Ten-year Treasury yields rose 17 basis points to 2.38 percent.

Europe’s Impact

The deal helped “calm markets,” Obama said. “If Europe is weak, if Europe is not growing as our largest trading partner, that’s going to have an impact on our businesses and our ability to create jobs here in the U.S.”

A Commerce Department report released today showed the U.S. economy grew at a 2.5 percent annual rate in the third quarter, the fastest pace in a year. White House press secretary Jay Carney said earlier today that the figure is a sign of progress for the U.S. recovery, “but it is not good enough by a long shot.”

The nation’s unemployment rate remained stuck at 9.1 percent in September. First-time jobless claims decreased by 2,000 to 402,000 in the week ended Oct. 22, the Labor Department reported today.

Obama said the key now is for European governments to make sure their plan is “implemented fully and decisively.”

G-20 Meeting

The president will continue conferring with European leaders on implementation of the agreement, Carney said earlier today. Obama will be meeting with them when the Group of 20 nations holds a scheduled summit in Cannes, France, on Nov. 3-4.

In an opinion article published in the Financial Times today, Obama wrote that the G-20 has a clear challenge.

“We must stay focused on the strong, sustainable and balanced growth that boosts global demand and creates jobs and opportunity for our people,” Obama wrote.

As the world’s largest economy, the U.S. must lead the global recovery by accelerating economic growth while also reducing the nation’s budget deficit in a way that won’t hamper expansion, he wrote.

Europe must act to resolve the debt crisis “as quickly as possible” by “building a credible firewall that prevents the crisis from spreading,” strengthening banks and creating a sustainable path for Greece, Obama wrote in the newspaper.

“I am confident that Europe has the financial and economic capacity to meet this challenge,” he wrote.

Meeting With Necas

Economic growth also was a topic in Obama’s meeting with the Czech leader, along with talks in preparation for a summit of the North Atlantic Treaty Organization scheduled for next May in Chicago. The Czech Republic, which entered the European Union in 2004, may adopt the euro as its currency but not until 2020 and not until a referendum is held, Necas, 46, said Oct. 24.

In their meeting, Obama was expected to put in a good word for Westinghouse Electric Co., which is seeking to win a $10 billion project to build nuclear reactors, according to Daniel Kostoval, deputy chief of mission at the Czech embassy in Washington.

“My understanding is that the president is going to raise it,” Kostoval said.

Westinghouse is competing to build two nuclear reactors at CEZ AS’s Temelin power station in the Czech Republic. CEZ is the largest Czech power utility. Two other competitors are Areva SA, a French contractor and the Russian-Czech consortium led by Atomstroyexport.

The project may be worth as much as about $10 billion and take about 10 years to complete, according to Kostoval. A decision on the winning bidder is expected in the spring of 2013.

--With assistance from James G. Neuger in Brussels and Simon Kennedy in Paris. Editors: Joe Sobczyk, Don Frederick

To contact the reporter on this story: Roger Runningen in Washington at rrunningen@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net


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