Posted on Thu, Nov. 03, 2011
last updated: March 15, 2013 11:57:46 AM
CANNES, France — Leaders of the world's most industrialized nations, gathered here for the annual G-20 summit, scrambled Thursday to rescue a European Union deal to restructure Greek debt and prevent a regional financial crisis from spreading and creating further global economic disruption.
President Barack Obama and his European Union counterparts held closed-door meetings looking for ways to salvage last week's marathon EU deal and get the world's economy back on the path of growth.
They got some welcomed help when Greece's main opposition party agreed to honor a controversial austerity program that had been set last week as part of a deal to provide debt relief to the country. That move headed off the possibility that the program would be put to a vote of the Greek people and be defeated, though Greek Prime Minister George Papandreou still faced a vote of confidence on his rule Friday.
"This is absolutely the best-case scenario," said Jacob Kirkegaard, a Danish research fellow at the Peterson Institute for International Economics in Washington. "We have gotten out of these two or three days of mayhem a longer, far more solid political commitment in Greece, which now becomes a bipartisan commitment for following through on these programs."
U.S. stock markets climbed on the news, with the Dow Jones industrial average closing up more than 208 points to 12,044.47. The S&P 500 also rose, ending the day up 23.25 points, to 1261.15, and the NASDAQ up 57.99 points to 2697.97.
White House officials offered upbeat assessments of U.S. officials' conversations with counterparts from a wide range of countries, though they declined to address Greek developments directly. They said European leaders recognized that they must act to deal with their economic crisis and that China "was playing quite a constructive role in these meetings." The officials also said China might agree to take steps to increase domestic consumption as a way to help stimulate the world economy.
A communique summing up the two days of talks was expected to be released Friday.
Thursday was a day of many moving parts in the crisis. The new head of the European Central Bank, Mario Draghi, who took over on Monday, lowered a key benchmark lending rate, signaling that he plans to do more than his predecessor did to promote growth aggressively in a region that's important to the U.S. and global economies.
Obama huddled privately with French President Nicolas Sarkozy and German Chancellor Angela Merkel. He praised Sarkozy and Merkel for their work on the deal — which includes a Greek bailout, restricting of its debts and bolstering an EU-wide rescue fund — but said more clarity was needed.
"We're going to have to flesh out more of the details about how the plan will be fully and decisively implemented," Obama said.
White House officials said the two days of uncertainty over what direction Greece would go underscored how important it was for Europe to develop a "firewall" to prevent financial turmoil in one country from roiling the globe.
Undersecretary of the Treasury Lael Brainard said that Obama, in his meetings with European leaders, had stressed the need for European institutions to be strengthened to respond to economic volatility.
"It is the full set of leaders and pan-European institutions that hold the key to the resolution of this crisis," she said.
Treasury Secretary Timothy Geithner met with Chinese Vice Premier Wang Qishan. Brainard called the Chinese role at the talks "constructive" and suggested that Friday's communique would refer to efforts on that country's part to spur world economic growth.
She said there would be "some language" in the final communique that "really shows a recognition that there is more that China is willing on its own initiative to do to help shift towards domestic consumption-led growth away from an export model."
The U.S.-led global financial crisis in 2008 has weakened America's ability to tell others how to fix their finances. But G-20 host Sarkozy glossed over that Thursday, saying, "We need the leadership of Barack Obama," and welcoming input from U.S. officials.
"We need the solidarity and the support of the United States of America," Sarkozy said. "We need joint common analysis as to the way we can put the world back on the path of growth and stability."
Obama hailed Germany's Merkel for the finance deal — which the administration thinks can stem the European debt crisis — even if it still lacks many details.
"Central to our discussions at the G-20 is how do we achieve greater global growth and put people back to work," Obama said. "That means we're going to have to resolve the situation here in Europe."
The drama in Greece, however, touched off by Papandreou's surprise announcement Monday that he'd ask voters to approve the deal, largely overshadowed the G-20 meetings.
The prospect of a referendum angered EU leaders, who warned Papandreou late Wednesday that a "no" vote would be a vote to exit the common market and the common currency, the euro.
Greece's finance minister, Evangelos Venizelos, denounced the proposed referendum, and Papandreou called a Cabinet meeting Thursday to deal with diverging opinions among his ministers on what the country should do.
In the end, Papandreou announced that he'd form a unity government with the opposition New Democracy party and together they'd support the deal.
One item on the table at the G-20 is Sarkozy's proposal for a financial transaction tax. Computer guru and philanthropist Bill Gates has been pitching G-20 leaders on the fee, which could raise revenue to help the downtrodden during downturns.
The French leader said that he and Obama found "common ground, or at least a common analysis, that the world of finance must contribute to solving the crisis that we are all facing today."
But the White House has been cool to the concept, suggesting instead a "financial crisis responsibility fee" that would be paid by the largest financial institutions, not average investors.
Advisers said privately that Obama "made clear that he shares the objectives that Chancellor Merkel and President Sarkozy have in ensuring that the financial sector contributes an appropriate share to the resolution of crises."
Mike Froman, the White House's deputy national security adviser for international economic affairs, added that there was "broad consensus" about the "ability of each to pursue this in their own way, whatever way they see to be most effective."
Despite the tensions, there were a few moments of levity. Obama quipped before the meeting with Sarkozy in the city that's home to the glitzy Cannes Film Festival that he was "hoping to come and see some movies."
Obama congratulated the French president and his wife, former supermodel Carla Bruni-Sarkozy, on the birth of their daughter, Giulia.
"I am confident that Giulia inherited her mother's looks rather than her father's, which I think is an excellent thing," Obama said.
The political fortunes of both leaders depend on economic progress, and the two are scheduled to make a joint appearance Friday on French television.
"French people love the U.S. and appreciate President Obama a lot," Sarkozy said.
A French journalist asked White House officials — who've fended off questions back home as to why some Democrats have been reluctant to appear with Obama as his poll numbers have slid _whether they knew that the American president's appearance could help Sarkozy.
"The French political calendar is what it is," Deputy National Security Adviser Ben Rhodes said. "As it relates to (Obama's) standing in France, we see that as a sign of the health of the alliance."
(Hall reported from Washington.)
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