US working to resolve euro crisis, Obama tells summit
PRESIDENT BARACK Obama yesterday said the US was “very actively engaged with Europe” to try to solve the euro zone crisis and “stands ready to do its part” to tackle the crisis. The issue was “hugely important” for the US, Mr Obama said, because if the European economy contracts, it becomes more difficult to create jobs in the States.
Mr Obama spoke in the East Room of the White House, flanked by the president of the European Council, Herman Van Rompuy, and the president of the European Commission, José Manuel Barroso.
But speaking to journalists after the annual US-EU summit, William Kennard, the US ambassador to the EU, made it clear there was little of substance the US could do to help with Europe’s debt crisis.
“The president has been very clear over a number of months now that we want to offer advice and guidance to Europe,” Mr Kennard said. “We have recent experience with our own financial crisis. President Obama has been engaged with many European leaders. He has spoken frequently with Chancellor Merkel and President Sarkozy. I want to be very clear there was no discussion about the US increasing its commitment to the IMF or making any other financial obligation to the EU. That was not a part of this discussion.”
Mr Obama’s latest intervention in Europe’s debt debacle came as the Organisation for Economic Co-operation and Development called on EU leaders to intensify the battle against the crisis. Although EU leaders have resolved to raise the lending capacity of the European Financial Stability Facility bailout fund to €1 trillion, the OECD called for more and said “credible” firepower was needed to stop the sell-off in sovereign debt.
Mr Obama was speaking before the credit rating agency Fitch placed a “negative” outlook on its assessment of American debt, saying there was a “slightly greater than 50 per cent chance” that the US would lose its triple-A rating within the next two years. Fitch’s warning, which underscores the vulnerability of the US in the global financial crisis, reflects fresh divisions over the effort to reduce the US budget deficit. It comes seven months after a similar warning by rival agency Standard Poor’s.
Meanwhile, in Berlin last night Polish foreign minister Radoslaw Sikorski warned of economic “apocalypse” unless Germany overcomes its historical fear of inflation to tackle the looming risk of euro zone collapse. “As Germany knows best, she is not an innocent victim of others’ profligacy: Germany, which should have known better, also broke the stability pact and its banks also recklessly bought risky bonds,” he said.
In Brussels, the European Commission dismissed an Italian report that said Rome was in discussions with the International Monetary Fund for up to €600 billion in aid.
Intensive pressure remained, however, as Italy and Belgium paid record interest rates to sell debt and Moody’s credit rating agency warned that the crisis threatens the ratings of all European governments and risked fragmenting the single currency. Moody cited political uncertainty in Italy and Greece, saying the likelihood of “even more negative scenarios” has risen in recent weeks, adding that this increased the likelihood of one or more defaults and the prospect of some countries leaving the single currency.
“The probability of multiple defaults (in addition to Greece’s private sector involvement programme) by euro area countries is no longer negligible. A series of defaults would also significantly increase the likelihood of one or more members not simply defaulting, but also leaving the euro area. ”
Euro zone finance ministers gather tonight in Brussels for talks ahead of a crucial EU summit next week. They will examine whether to release a delayed €8 billion loan to Greece, money the country needs to avert bankruptcy next month.