CANNES, France — President Barack Obama and world leaders open two days of pivotal meetings here Thursday, hoping to salvage a package to stabilize the European economy and prevent its woes from sparking a global recession and further weakening a shaky U.S. economy.
The G-20 leaders meeting had been seen as a victory lap for the turbulent global economy after European leaders last week hammered out a package of measures to calm the euro by cutting Greece’s debt burden in return for austerity measures. But an about face by the Greek government — which is not even a member of the G-20 — threatens to consume the event.
Headlines in European newspapers Wednesday warned Greece was “teetering on the edge of disaster” and French Prime Minister Nicolas Sarkozy and German Chancellor Angela Merkel were to meet with Greek Prime Minister George Papandreou who set off shock waves by proposing to ask voters to approve the debt deal hammered out last week — a move that could derail the rescue package.
Obama arrives here early Thursday morning for his fifth and arguably toughest G-20 summit as he and European leaders struggle to develop a fix for the cratering Greek economy and prevent it from spilling over its borders. His first appointments after landing will be head-to-head private meetings with Sarkozy and Merkel, before a lunch with G-20 leaders and working sessions.
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"This is really crunch time, the stakes could not be higher," said Heather Conley, director of the Europe program at the Center for Strategic and International Studies. The debt deal, she said, "may have just been unwound" by Papandreou's move.
The stakes could not be higher for the U.S. president, either, whose reelection odds may depend on the health of the U.S. economy.
Obama has cited the European debt crisis while campaigning for his $447 billion jobs package, arguing that Europe's debacle is one of the "headwinds" that has threatened the U.S. economy.
He was to continue pressing for his jobs package before departing for Cannes, delivering remarks in front of a bridge in Washington, D.C. and urging Congress to create a $10 billion infrastructure bank.
The meeting of leaders of industrialized and developing countries in the idyllic South of France comes amid a sea of global protests aimed at financial institutions and protestors took to the streets of nearby Nice on Tuesday, the Associated Press reported, urging world leaders not to neglect the world's poor.
Activists from Oxfam stripped down to green Robin Hood-style hats to push for a tax on international financial transactions that could be used for aid to poorer nations. The group said Wednesday that aid from rich nations is expected to fall by at least $9.5 billion by the end of 2012 — the biggest drop in 15 years.
The summit’s host, French President Sarkozy has expressed support for the financial transaction tax, as has Rowan Williams, the Archbishop of Canterbury, who in a column in Wednesday's Financial Times called on the UK government to embrace such a tax. The White House response to such a proposal has been muted.
Under Secretary of Treasury for International Affairs Lael Brainard told reporters at the White House Monday that the administration was "very much in sync with Europe on their goal of ensuring both that large financial institutions bear their fair share of the burden, but also that they're discouraged from taking the kind of risky behavior that led to the crisis."
But she said the White House has proposed a "financial crisis responsibility fee" that would be paid by the largest financial institutions, not retail investors.
But most analysts expect that issue, as well as Obama's effort to push for restoring balance in world trade, to be overshadowed by the Eurozone crisis.