US wants debt action as Obama hosts Eurozone summit

Obama has repeatedly stressed his anxiety over the
eurozone crisis and halting efforts to fix it
© AFP Mandel Ngan

WASHINGTON (AFP) – The United States said Monday that Europe needed to act “now” with force and decisiveness to attack the eurozone debt crisis, as President Barack Obama hosted a summit with top European officials.

The US-European summit at the White House came amid stark new warnings on the depths of the eurozone turmoil and renewed fears that the exposure to Europe of US banks could rebound and harm the slow US economic recovery.

“This is something they need to solve and they have the capacity to solve,” said White House spokesman Jay Carney.

“Our position is and has been that it’s critical for Europe to move with force and decisiveness now, particularly with new governments coming into place in Italy, Greece and Spain.”

Obama hosted European Council President Herman Van Rompuy, European Commission President Jose Manuel Barroso, High Representative Catherine Ashton and other officials for talks and lunch at the White House.

The talks, also including US Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner, opened with a brief photo-op, and were to conclude later with statements from both sides.

The US president has repeatedly stressed his anxiety over the eurozone crisis and halting efforts to fix it, and could pay a heavy price if economic panic vaults the Atlantic and slows the US recovery as he seeks reelection.

A study by Fitch ratings agency published last week warned that exposure of the US financial sector to European countries and banks was “sizable.”

The White House talks take place as France and Germany seek to frame yet another plan to seek to end the stubborn two-year debt crisis, and outside observers delivered pessimistic warnings on the extent of eurozone woes.

The Organization for Economic Cooperation and Development (OECD) warned that policymakers were failing to see the urgency of acting to tackle risks to the global economy, and rapped the United States as well as Europe.

Moody’s Investors Service warned that all European Union sovereign debt ratings, not just those of teetering nations like Italy, Greece and Portugal were at risk, pointing to a widening of the crisis.

“In the absence of policy measures that stabilize market conditions over the short term, or those conditions stabilizing for any other reason, credit risk will continue to rise,” Moody’s said.

Obama has consistently called on European leaders to construct a eurozone firewall and insists Europe has the capacity to fix the crisis — though questioned whether there is sufficient political will.

“I am deeply concerned and I have been deeply concerned. I suspect I will be deeply concerned tomorrow and next week,” Obama said when asked about his reaction to the crisis in the eurozone in Australia this month.

Despite its exposure to Europe and its status as the world’s top economic power, the United States has limited capacity to influence the eurozone crisis, and has been cajoling top European leaders to act decisively.

Washington’s moral standing on the issue has also been called into question by its failure to make its own tough political decisions needed to fix its bulging deficit, with little movement likely ahead of a 2012 election year.

And despite offering a platform for Obama to express renewed concern, it was unlikely the summit would make much progress as it lacks key players like German Chancellor Angela Merkel and French President Nicolas Sarkozy.

Reports said Monday that key eurozone leaders were considering a push for strict new budget rules for member states to fix the crisis, rather than recommending changes to EU treaties, which could take years.

The White House said the summit would address “efforts to strengthen economic ties and growth” but also take on developments in the Middle East following the Arab Spring and law enforcement and counterterrorism cooperation.

It was likely that Iran’s nuclear drive would also come up, following new steps by Washington and its allies to deepen Tehran’s isolation in the wake of a UN report citing new evidence of a nuclear weapons program.

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