Barack Obama heads to the G-20 summit on Sunday, in the knowledge that his presidency may depend on swift, sweeping action by his European counterparts to contain their financial contagion.
A collapse of the euro, or financial spillover that could spook US markets, could move closer after Greece’s election on Sunday, and has the potential to further weaken the tepid US recovery before Obama seeks reelection in November.
Washington does not expect Europe to use the talks in Mexico to finalise measures it will take to quell the raging crisis, partly because only eurozone leaders from France, Germany, Italy and top EU officials will attend.
But they do expect a clear signal at the Mexican resort on the tip of the Baja peninsula about the approach Europe will adopt at what is shaping up as a fateful summit of the 17-member eurozone at the end of the month.
“Los Cabos provides a timely opportunity for European leaders to update on their progress and to serve as a catalyst for future action,” said Lael Brainard, Treasury under secretary for international affairs.
Deputy National Security Adviser for International Economics Mike Froman said the G-20 wanted to hear more about how Europe planned to stabilise its banking system and move toward fiscal and financial union. “That being said, Los Cabos will not be the final word on the eurozone,” he added. “That is a continuing conversation with some important milestones, including a meeting of all EU leaders coming up in Brussels at the end of the month.”
Obama will not focus exclusively on economics and finance at Los Cabos. But Europe will top his agenda. Obama and top aides, including Treasury Secretary Timothy Geithner, have burned up trans Atlantic phone lines for months as Europe slipped deeper into the mire and Greece, Spain and Italy slumped from crisis to crisis.
The president enters the G-20 summit, which could conceivably be his last, in a perilous political position, amid a neck-and-neck reelection tussle with Republican Mitt Romney dominated by the lagging economic recovery.
His reelection prospects darkened this month when official data showed the economy only produced 69,000 jobs in May, and the unemployment rate rose to 8.2 per cent, showing the economy was in no shape to absorb a shock from Europe.