By RFE RL
(RFE/RL) — U.S. President Barack Obama has urged European leaders to take “clear action” to combat the deepening financial crisis in the eurozone.
At a press conference at the White House on June 8, Obama maintained that there is “a path out of this challenge:”
“The bottom line is [that] the solutions to these problems are hard, but there are solutions,” he said. “The decisions required are tough, but Europe has the capacity to make them and they have America’s support.
“Their success is good for us and the sooner that they act and the more decisive and concrete their actions, the sooner people and markets will regain some confidence and the cheaper the costs of cleanup will be down the road.”
Obama’s comments come as markets speculate on a vast European bailout for Spain’s troubled banks after the Fitch ratings agency slashed Madrid’s credit rating to just two notches short of junk status on June 7.
The move, along with negative economic data from Italy and eurozone powerhouse Germany, sent the value of the euro sliding the following day.
Obama insisted that European leaders “understand the seriousness of situation and the urgent need to act”:
“We know that there are specific steps that [European leaders] can take right now to prevent the situation there from getting worse,” he said. “In the short term, they’ve got to stabilize their financial system. Part of that is taking clear action as soon as possible to inject capital into weak banks.”
Spanish Bank Bailout Expected
Reuters quotes EU officials as saying that Spain is expected to ask the eurozone for help recapitalizing its banks this weekend.
If granted, the country would be the fourth to seek assistance since Europe’s debt crisis began.
In the longer term, Obama stressed the need for more unified budgetary and banking policy for Europe.
He also praised renewed consideration in Europe of a growth agenda.
There are also fears that contagion from debt-plagued Greece could further weaken the strained economies of Ireland and Portugal.
Greece’s exit from the eurozone bloc looks possible if left-wing parties opposed to the harsh austerity measures imposed by the EU and IMF bailout of the country win a June 17 general election.
Obama warned Greece that a departure from the eurozone could mean even tougher conditions than those they currently face.
“We recognize the sacrifices that the Greek people have made and European leaders understand the need to provide support if the Greek people choose to remain in the eurozone,” he said. “But the Greek people also need to recognize that their hardships will likely be worse if they choose to exit from the eurozone.”
European ‘Headwinds’ Hamper U.S.
Obama said that “headwinds” from Europe were contributing to a slower than desired U.S. economic recovery.
But he also took the opportunity to take a shot at Republicans, accusing them of blocking his 2011 jobs plan due to election-year politics.
The economic situation is the top issue on U.S. voters’ minds ahead of the November presidential election.
The U.S. employment rate rose slightly to 8.2 percent in May, the first increase in nearly a year.
Obama’s plan includes bills on job creation, infrastructure spending, and tax breaks for small businesses.
Republicans have instead suggested cuts in federal spending programs.