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At G-8, Obama to champion growth to fix European financial crisis

By Lesley Clark, McClatchy Newspapers –

WASHINGTON — U.S. presidents have long sought relief from battles inside the Beltway and have entertained visiting heads of state at Camp David, the presidential retreat nestled in a mountain range in nearby Maryland.

Now, President Barack Obama will welcome world leaders to the secluded getaway as economic chaos in Europe continues to roil global markets, prompting fears that Europe’s misfortunes could threaten the U.S. economic recovery, and possibly Obama’s chances at re-election.

Solving Europe’s woes is likely to dominate talks at the G-8 summit among the leaders of the world’s richest democracies.

The White House is billing the get-together at the secluded retreat in the Catoctin Mountains as a “back to basics” gathering, saying the “intimacy” of the retreat will allow for candid talk. Analysts say the administration is hoping to hear embattled European leaders voice support for growth measures, as well as the tough austerity measures that have yet to stem the crisis.

“European leaders have signaled they intend to do whatever it takes to reinforce the foundations of their monetary union,” said Michael Froman, Obama’s deputy national security adviser for international economic affairs. But, he added, that “serious risks remain and the markets are skeptical that the measures taken so far are sufficient to secure the recovery and remove the risk of the crisis deepening further.”

The White House has put the onus on Europe to take action and has offered advice, but analysts say the stakes for a recovery are critical for the White House.

“In the next six months, his fate for a second term will be decided and there’s a good chance Europe could highjack the electoral campaign,” said Domenico Lombardi, president of the Oxford Institute for Economic Policy in England and a senior fellow at the Brookings Institution, a Washington-based think tank. “The truth is so far, the Europeans have been only modestly effective in tackling the crisis.”

Analysts expect Obama to continue a path of quiet diplomacy, prodding European leaders to find a way out of the economic turmoil that could rattle U.S. markets. He’s expected to continue to press for growth measures, along with the austerity measures championed by German chancellor Angela Merkel.

“This is a euro-crisis summit, it will be dominated by the crisis,” said Heather Conley, director of the Europe Program at the Center for Strategic and International Studies, a Washington-based think tank. “There’s a complete understanding that in a worst-case scenario, should the European crisis begin to rapidly deteriorate, the impact on the U.S. economy six months before a presidential election has profound implications for our economy and for our elections.”

Obama said in an interview this week that Europe’s problems are “creating uncertainty for the business community here.”

The debate in Europe in some ways reflects the U.S. struggle over how to respond to the 2007 recession. Obama championed a stimulus package, and the administration contends that its actions staved off a steeper decline. Obama has proposed more stimulus spending, including more on transportation projects and modernizing schools, but Republicans in Congress have opposed the efforts and back tax and spending cuts as a way to grow the economy.

The G-8 meeting will feature a number of new faces, principally France’s Socialist President Francois Hollande, who was elected amid grumbling over the austerity measures. Like Obama, Hollande champions spending on government stimulus programs to keep Europe’s economy afloat.

Analysts suggest there are signs that the Europeans, including German Chancellor Angela Merkel, are more open to growth measures — a move that Lombardi said could be a “good opportunity for Obama in trying to reassert the importance of growth.”

Obama will meet with Hollande on Friday at the White House before the summit and will greet the leaders at Camp David late Friday. It will mark Obama’s first meeting with foreign leaders at the presidential retreat.

The administration’s influence is “relatively limited” given its decision to put the focus on Europe to fix the problem, acknowledged Matthew Goodman of the Center for Strategic and International Studies, who was an Obama adviser on setting up the G-8 and other international forums.

“But the anxiety will be real,” Goodman said. “And that will come out, I’m sure, in what President Obama says to the European leaders.

“The conversation does help enhance understanding and frankly put a little bit of peer pressure on the Europeans to move the ball down the field,” he said.

The White House also wants to put an emphasis on Africa and food security and has invited the presidents of three African countries that are championing ways to increase farm productivity. Obama is to announce a plan for increasing agricultural productivity on Friday.

Other topics include aiding job creation and financial stabilization in the Middle East, energy and climate change, transitioning out of Afghanistan and a discussion of global hot spots including Syria, Iran and North Korea.

Another factor at the summit will be a world leader who won’t be there: Russian President Vladimir Putin, who is instead sending Prime Minister Dmitry Medvedev. The Kremlin has said Putin is too busy forming a government after his inauguration, but U.S. analysts point to tension between the administration and Putin over efforts to oust Syrian leader Bashar Assad, Iran’s nuclear ambitions and a planned U.S. missile defense system for Europe.

“The Russian excuse that Putin is busy putting a new government together is not very credible, since he’s been running the government for the last eight years anyway,” said Stephen Flanagan of the Center for Strategic and International Studies. “Since Russia is seen as key to any kind of move to get Assad out, and they don’t have much to offer yet on Iran, I think there’s a signal that they wanted to avoid some tough issues.”

The White House shrugged off the snub, noting that Obama will meet with Putin as soon as next month at the G-20 summit in Los Cabos, Mexico.

“I wouldn’t over-interpret President Putin’s decision,” Froman said. “We are in very close touch.”

But Conley called Putin’s decision to sit out the U.S.-hosted event “extraordinary.”

“I don’t believe it bodes well in the near term for working constructively with Moscow on some of these more significant issues,” she said.

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