President Barack Obama called the European debt crisis an issue of “extraordinary importance” to the global economy and said that fiscal responsibility should be coupled with policies to promote growth.
Obama made the comments after meeting with French President Francois Hollande at the White House, hours before they join other leaders of the Group of Eight nations at a summit at Camp David, the presidential retreat in Maryland.
Hollande, through a translator, said growth must be a priority along with improved finances. He and Obama “share the same views” that Greece should stay in the euro region “and that all of us must do what we can to that effect.”
Obama said the G-8 leaders will talk tonight and tomorrow “about how we can manage a responsible approach to fiscal consolidation that is coupled with a strong growth agenda.”
The agenda for Obama’s meeting with Hollande, their first, matched many of the issues that will be in front of the rest of the G-8 tonight and tomorrow: the European debt crisis and the situation in Greece, the winding down of the war in Afghanistan and the international response to Iran and Syria. Also on the G-8’s list of topics are the world oil market and the use of strategic petroleum reserves to keep crude prices stable.
Hollande earlier this month became the first Socialist in 17 years to control Europe’s second-biggest economy by defeating Nicolas Sarkozy, with whom Obama developed a close working relationship in dealing with issues from Libya to Iran.
Views on Growth
Hollande’s advocacy of more growth and less austerity in Europe puts him at odds with German Chancellor Angela Merkel, who opposes adding to nations’ debt burdens. That makes Hollande a potentially valuable ally for Obama, who has advocated a more growth-focused approach. Merkel will also attend the Camp David meetings.
European leaders face pressure to do more to quell the crisis after almost $4 trillion was wiped from global equity markets this month amid speculation that Greece will exit the euro. European stocks headed for their biggest weekly decline since November and the euro touched a four-month low amid investor concern that the crisis is worsening.
Yields on two-, five-, and 30-year German securities earlier fell to all-time lows after Moody’s Investors Service lowered the credit ratings of 16 Spanish banks, spurring demand for Europe’s safest government debt. Separately, Greece’s credit grade was lowered one level by Fitch Ratings.
Europe’s G-8 chiefs -- Hollande, Merkel, Italian Prime Minister Mario Monti and U.K. Prime Minister David Cameron, plus European Union leaders Herman Van Rompuy and Jose Barroso --held a video call on the crisis yesterday and agreed that fiscal rigor and economic growth are mutually compatible, Merkel’s office said. The G-8 also includes Russia and Canada.
“During the G-8, it’s very important to see that the Europeans form a common position as quickly as possible,” German Finance Minister Wolfgang Schaeuble said in a recorded interview broadcast today on France’s Europe 1 radio. “In recent years we haven’t been quick enough” at doing that.
The U.S. is seeking agreement on a common goal “to preserve the foundations of the euro zone, to address the current crisis facing Europe, particularly as a result of the political events in Greece,” White House National Security Adviser Tom Donilon said.
At their news conference, Hollande said he and Obama didn’t discuss using strategic oil reserves, though that will be one of the topics when the G-8 leaders convene tonight. He said France was ready to use all tools to keep oil prices low.
The subject is being discussed as the U.S. and its allies prepare for the imposition of a European Union embargo on Iranian oil that’s set to begin July 1. A steep rise in prices may threaten the global economy.
The International Energy Agency has no definite plan to release fuel from its emergency reserves, David Fyfe, the head of its oil industry and markets division, said at a conference in London today.
U.S. officials have repeatedly said that no decision has been made on using the reserves in the U.S. and Europe, which were last tapped in June 2011 to offset a disruption in supplies caused by upheaval in the Middle East and North Africa
Crude oil for June delivery fell $1.08 to $91.48 a barrel on the New York Mercantile Exchange, the lowest settlement since Oct. 26. Prices retreated 4.8 percent this week, and are down 7.4 percent this year.
While Obama and Hollande affirmed their common concerns about keeping up pressure on Iran over its nuclear program and on the government of Syria, one area of potential friction is the Afghan war.
Hollande made a campaign pledge to withdraw French combat forces from Afghanistan by the end of 2012, a year ahead of Sarkozy’s plan and against U.S. wishes. That may frustrate U.S. efforts to keep European forces in place there through 2014, and to get NATO partners to help underwrite an estimated $4.1 billion a year in assistance to Afghan security forces over the following decade.
Hollande said he’s confident a deal can be reached under which “allies can continue with their mission and at the same time I can comply with the promise that I made to the French people.”
Commitment to Alliance
Hollande reaffirmed France’s commitment to its alliance with the U.S. “We’ve had our differences but we’ve always managed to overcome them,” he said.
Donilon signaled yesterday that Obama accepts Hollande’s plans for combat force withdrawals and will focus on what other sort of contributions Hollande may offer, such as trainers or other types of assistance.
From the G-8 meeting in rural Maryland, most of the leaders will travel tomorrow evening to Chicago for a North Atlantic Treaty Organization summit where a central topic is a discussion of military issues, including funding and manpower to support Afghanistan after coalition forces leave at the end of 2014.
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