Obama 'encouraged' on Europe; G-20 seeks answers

[June 19, 2012]  LOS CABOS, Mexico (AP) -- Needing an economic boost, President Barack Obama is trying to land assurances that Europe is closing in on a financial crisis response that will calm the markets and keep the continent's woes from undermining the world. As he presses European leaders to drum up economic demand, they want promises the United States won't plunge off a fiscal cliff by year's end.

Obama, as leader of the giant but struggling U.S. economy, remains central to the Group of 20 summit talks wrapping up Tuesday in this coastal resort region. But it is the European members gathered here, led by Germany and its chancellor, Angela Merkel, who carry both the power and responsibility to stabilize a eurozone reeling from debt, banking and political problems.

Obama sent some upbeat signals Monday amid a sense of global relief that Greece, based on new elections, would not renege on its bailout terms and ditch the euro currency. Obama left a meeting with Merkel feeling "encouraged" about Europe's direction, a spokesman said, as an even more consequential European summit on the crisis approaches in Brussels.

Europe's ability to turn around its fortunes fast will have direct bearing on whether Obama wins a second term. The bigger the drag from abroad, the harder the job growth in the United States.

Obama said all countries must "make sure that we're contributing so that the economy grows, the situation stabilizes, confidence returns to the markets, and most importantly, we're giving our people the chance if they work hard to succeed and do well." After lobbying for Greek voters to stick with budget reforms and the euro, he called their election results a "positive prospect."

Obama was spending much of his Tuesday on the economic crisis after taking care of some unrelated diplomatic business -- his first meeting with Vladimir Putin since the former Russian president returned to the job this year. The leaders met for two hours Monday, in talks dominated by a bloody Syrian conflict that has deeply divided Russia and the U.S.

Obama has set up private talks with one other leader, Chinese President Hu Jintao, on Tuesday before closing off his summitry with a news conference in the late afternoon.

Although the foreign gatherings allow Obama to show off statesmanship, every day spent away from the United States and a direct focus on jobs in America quietly gives headaches to his campaign aides. While Obama was in Mexico, his Republican competitor, Mitt Romney, was campaigning in the American heartland, trying to pull Wisconsin from Obama's column.

Central to the G-20 debate is how nations can boost jobs and consumer demand without sinking deeper into debt. Obama has implored governments to spend and grow, not just cut.

A draft of the leaders' final statement shows they want assurances that the United States won't take a deep plunge and drag them down as well.

The statement says the U.S. will "calibrate" its attempt to rein in debt and spending "by avoiding a sharp fiscal contraction in 2013."

That's a reference to a big threat to economic growth in the United States after the November election: the expiration of George W. Bush-era tax cuts and a scheduled round of automatic spending cuts that could send the nation back into a recession.

While the White House and lawmakers agree that they must act late this year or early next year to avoid such a "fiscal cliff," there is no path yet on how to avoid it.

Wall Street showed no giddiness after pro-Europe parties prevailed in Sunday's Greek election. U.S. stocks were little changed and investors seemed fed up with Europe's crisis.

Obama's political move has to been constantly show confidence in Europe's ability to solve its problems, but prod its leaders to move and chide them for not doing more sooner.

Now, White House aides talk more positively about the direction of the debate, as they see it, toward the role of government in spurring economic growth.

"I think if you look at the shift in the focus, you'll see a very strong focus on supporting demand, ... recognizing that economic conditions have deteriorated," said Lael Brainard, the Treasury Department's undersecretary for international affairs.

"This is very important to the Europeans in particular," she said. "And yes, we have heard it from German colleagues."

[Associated Press; By BEN FELLER]

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