CANNES, France — Leaders of the world’s most industrialized nations scrambled Thursday to rescue a European Union deal to restructure Greek debts and prevent a regional financial crisis from spreading and creating further global economic disruption.
President Barack Obama and his European Union counterparts held closed doors meetings looking for ways to salvage last week’s marathon EU deal and get the world's economy back on a growth path.
They got some welcomed help when Greece's main opposition party agreed to honor a controversial austerity program that had been set last week as part of a deal to provide debt relief to Greece. That move headed off the likelihood that Greek Prime Minister George Papandreou would be forced from office over his proposal to put the austerity program to a vote of the Greek people _ a step that now seems off the table.
"This is absolutely the best-case scenario," said Jacob Kirkegaard, a Danish research fellow at the Peterson Institute for International Economics. "We have gotten out of these two or three days of mayhem a longer, far more solid political commitment in Greece, which now becomes a bipartisan commitment for following through on these programs."
Thursday was a day of many moving parts in the crisis. The new head of the European Central Bank, Mario Draghi, who took over Monday, lowered a key benchmark lending rate, signaling that he plans to do more than his predecessor to promote growth aggressively in a region important to the U.S. and global economies.
Against the breathtaking backdrop of fast-moving events, Obama warned that the “most important” task for world leaders gathered in the French seaside playground of Cannes is resolution of Europe’s financial crisis.
The U.S. president huddled privately with French President Nicolas Sarkozy and German Chancellor Angela Merkel on his arrival early Thursday for the G-20 Summit. The G-20 is comprised of the United States, EU and leaders of the 18 other most industrialized nations.
Obama praised Sarkozy and Merkel for their work on the deal_ which includes a Greek bailout, restricting of its debts and bolstering an EU-wide rescue fund — but said more clarity is needed.
“We're going to have to flesh out more of the details about how the plan will be fully and decisively implemented,” Obama said.White House officials said the uncertainty of what direction Greece would go made it more important than ever that Europe develop a "firewall" to prevent financial turmoil in one country from roiling the globe.
The deal needs to be enacted “irrespective of where we are at any given moment in a country’s politics,” said Deputy National Security Advisor Ben Rhodes.
The U.S.-led global financial crisis in 2008 has weakened America’s ability to tell others how to fix their finances. But G-20 host Sarkozy glossed over that, saying “we need the leadership of Barack Obama,” and welcomed input from U.S. officials.
“We need the solidarity and the support of the United States of America,” Sarkozy said. “We need joint common analysis as to the way we can put the world back on the path of growth and stability.”
Obama later met with German Prime Minister Angela Merkel, hailing her for the deal that the administration thinks can stem the European debt crisis – even if that plan still lacks many details.
“Central to our discussions at the G-20 is how do we achieve greater global growth and put people back to work,” Obama said. “That means we’re going to have to resolve the situation here in Europe.”
Even as Obama met with Merkel and Sarkozy, Greece was reeling from Papandreou's surprise announcement Monday that he’d ask voters to approve the deal to stabilize the European economy. EU leaders warned him late Wednesday that a no vote would be a vote to exit he common market and the common currency, the euro.
Greece’s finance minister denounced the proposed referendum, and Papandreou called a cabinet meeting Thursday to deal with diverging opinions among his ministers on what Greece should do, just one day after his cabinet seemed to back the referendum. Reports from Greece suggested a national unity government was being cobbled together.
White House officials said the uncertainty of what direction Greece would go made it more important than ever that Europe develop a "firewall" to prevent financial turmoil in one country from roiling the globe.
One item on the table at the G-20 is Sarkozy’s proposal for a financial transaction tax, which would be levied on big financial institution. Computer guru and philanthropist Bill Gates has been pitching G-20 leaders on the fee, which could raise revenue to help the downtrodden during downturns.
The French leader said that he and Obama found "common ground, or at least a common analysis, that the world of finance must contribute to solving the crisis that we are all facing today."
But the White House has been cool to the concept, suggesting instead a "financial crisis responsibility fee" that would be paid by the largest financial institutions and not average investors.
Advisors privately said Obama “made clear that he shares the objectives that Chancellor Merkel and President Sarkozy have in ensuring that the financial sector contributes an appropriate share to the resolution of crises.”
Mike Froman, the White House’s deputy national security adviser for international economic affairs, added that there was “broad consensus” about the “ability of each to pursue this in their own way, whatever way they see to be most effective.”
Despite the tensions, there were a few moments of levity too. Obama quipped before the meeting with Sarkozy in the city that’s home to the glitzy Cannes Film Festival that he was "hoping to come and see some movies."
Obama congratulated the French president and his wife, former supermodel Carla Bruni-Sarkozy, on the birth of their daughter, Giulia.
"I am confident that Giulia inherited her mother’s looks rather than her father’s, which I think is an excellent thing,” Obama said.
The political fortunes of both leaders depend on economic progress, and the two are scheduled to make a joint appearance on French television on Friday.
"French people love the U.S. and appreciate President Obama a lot," Sarkozy said.
White House officials — who have fended off questions back home as to why some Democrats have been reluctant to appear with Obama as his poll numbers have slid — were asked by a French journalist if they knew his appearance could help Sarkozy.
“The French political calendar is what it is," said Rhodes said. "As it relates to (President Obama's) standing in France, we see that as a sign of the health of the alliance."
It was grey and overcast along the French Riviera as Obama's motorcade left the Nice airport after his arrival in France Thursday. Along the route, electronic road signs warned about G-20 related road closures.
Signs hailing the summit boasted "L'histoire s'ecrit a Cannes.” Translation: History's being written in Cannes."
(Clark reported from Cannes, Hall from Washington.)
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