High stakes, lower expectations: G-20 won't be final world on Europe but US wants progress

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In this Tuesday, Dec. 6, 2011 photo, President Barack Obama speaks about the economy at Osawatomie High School in Osawatomie, Kan. THE CANADIAN PRESS/AP, Carolyn Kaster

CHICAGO - With global anxiety rising, President Barack Obama is searching for bolder, swifter signals from Europe that it will contain its financial mess and keep it from torpedoing the U.S. economy and his re-election chances along with it.

Yet as he prepares for summit talks beginning Monday in Mexico with the other world leaders, Obama is down to the power of persuasion and little else.

A looming, perilous Greek election and Europe's internal politics are controlling the debate.

Given the teetering global economy and the breadth of leaders about to gather in the coastal resort of Los Cabos, the Group of 20 summit meeting carries the weight of expectations it is not likely to meet. Most of its members are not part of Europe and they have no power to drive how the continent manages its crisis, although do they come looking for signs of progress and urgency.

That clearly is the case for Obama, locked in a tight election that may be decided singlehandedly by whether U.S. job growth sinks or climbs over the next five months.

While economic challenge will dominate the summit, the agenda runs deeper.

In talks on the sidelines, Obama will confront the bloodshed in Syria and the nuclear threat in Iran. He will meet with Vladimir Putin, who has returned to the presidency of Russia. Their talks will be scrutinized, given tense U.S.-Russian political relations and deep divisions over Syria.

Obama was to head to Mexico on Sunday night after a weekend with his family in their hometown of Chicago. The summit runs Monday and Tuesday.

Europe's entangled financial crisis, from debt woes in Greece to banking trouble in Spain and high unemployment all around, has become the single biggest threat to the U.S. economic recovery. The signs of worry are clear at the White House and in the words of Obama, who can draw a straight line from the fate of Europe's economic strength to his chances of a second term.

Obama is prodding European leaders to give world markets some confidence, and fast.

"Obviously, this matters to us because Europe is our largest economic trading partner," Obama said. "If there's less demand for our products in places like Paris or Madrid, it could mean less business for manufacturers in places like Pittsburgh or Milwaukee. The good news is there is a path out of this challenge. These decisions are fundamentally in the hands of Europe's leaders."

He wants to emerge from Mexico with signs that the European players at the table, led by Germany, are moving on their own agenda. That means pursuing a banking union to match the monetary union linking the eurozone, taking steps to keep borrowing costs down in the weakest nations and injecting life into economies with growth plans involving public money.

Or in short, as Treasury Undersecretary Lael Brainard put it, the focus in Mexico will be "ensuring our European partners are escalating their response" to stabilizing a dicey situation.

"The stakes are high for all of us," she said.

The agenda threatens to be upended by the outcome of Sunday's election in Greece.

In choosing a new government for their debt-drowning nation, Greek voters are deciding whether to stick with the deeply unpopular austerity terms of an international bailout package or reject them. If they do the latter, that could lead Greece to default and get booted out of the eurozone, which could cause panic and destabilize the world's financial system.

Here, too, Obama has tried to hold sway from abroad.

"It is in everybody's interest for Greece to remain in the eurozone while respecting its commitment to reform," he said. "We recognize the sacrifices that the Greek people have made. ... But the Greek people also need to recognize that their hardships will likely be worse if they choose to exit from the eurozone."

Of the G-20 collection of emerging and economic giants, only Germany, Italy and France are in the 17-nation eurozone at the centre of the crisis. European leaders point to a different summit of their own, to be held in Brussels at the end of June, as the more appropriate time to watch for action on a crisis response plan.

Given that dynamic, Obama officials have worked to keep expectations in check.

"Los Cabos will not be the final word on the eurozone," said Mike Froman, deputy national security adviser for international economic affairs.

Even beyond Europe, from Asia to the Americas, the economy is softening and fears are soaring.

The G-20 is meant to serve as the premier voice of economic co-ordination, representing not just traditional powers but emerging economies. Its members are Argentina, Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, South Korea, Russia, Saudi Arabia, South Africa, Turkey, the U.S. and the European Union.

Obama's advisers do see the G-20 as a chance for the European nations to add some definition to their plans and show how they will put aside sovereign concerns to avoid calamity.

That pressure can help, said Matthew Goodman, who formerly oversaw the G-20 planning for Obama as director of international economics on the National Security Council staff.

"If you have to go into a meeting with peers and explain yourself, it gives the Europeans some ammunition when they have to try to sell these changes domestically," said Goodman, a specialist in political economy at the Center for Strategic and International Studies. "They can say, 'This is what the world expects.'"

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Online:

G-20: http://www.g20.org

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