Obama Calls Merkel On EU Economy

Posted December 7th, 2011 at 7:15 pm (UTC-5)
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U.S. President Barack Obama spoke with German Chancellor Angela Merkel by telephone Wednesday on ways to resolve Europe's debt crisis which is affecting the global economy.

The White House said President Obama and the German chancellor agreed on the need to find a lasting and credible solution for the eurozone crisis. The U.S. president has repeatedly urged European leaders to do what is necessary to fix the crisis as soon as possible.

His latest call comes ahead of a Thursday summit of European Union leaders in Brussels.

Germany and France are pressing their case for European leaders to act quickly to resolve the continent's debt crisis and save the common euro currency.

Chancellor Merkel and French President Nicolas Sarkozy detailed their plan Wednesday to end the two-year debt contagion in a letter to European Council President Herman Van Rompuy. The German and French leaders called for automatic penalties against governments that violate budget limits, a unified corporate tax rate and a new financial transaction tax.

Ms. Merkel and Mr. Sarkozy, who oversee Europe's two largest economies, said they are “convinced that we need to act without delay.” They said new EU treaty provisions should be ready for adoption by March.

But Britain, which does not use the common euro currency, has indicated that it may not be willing to sign on to the new EU treaty provisions. Prime Minister David Cameron said earlier this week that he will defend Britain's interest at the summit in Brussels.

All 27 EU nations have to agree on any changes to their treaty. If other non-eurozone countries follow Britain's example, only the 17-nation bloc that uses the euro might agree to more centralized authority over budgets.

Britain, with its own currency , says it is worried about handing control over its spending to a new European-wide authority. That could make a Europe-wide debt resolution more difficult to achieve.

Some analysts say the survival of the continent's 12-year monetary union is at stake at the summit. Economists worry that the world economy could plunge into a new recession if the European debt crisis is not resolved.

U.S. Treasury Secretary Timothy Geithner, fearful of the effects of a euro collapse on the fragile American economy, is on a three-day trip to European capitals to prod officials to adopt strong measures.

After meeting with French Finance Minister Francois Baroin in Paris, Geithner expressed confidence that the European officials will move to control government spending, create new economic growth and calm jittery financial markets worried about governments defaulting on their debts.

Credit agency Standard & Poor's this week put 15 of the 17 nations that use the euro, including Germany and France, on a negative credit watch. It also warned it may downgrade the top rating of the bailout fund for Europe's debt-ridden countries. Greece, Ireland and Portugal have all already needed international bailouts, with analysts fearing that Italy and Spain, the continent's third and fourth largest countries, also might need help.

The credit rating agency has criticized European officials for “a very slow and reluctant response” to the continent's debt crisis. It has also expressed skepticism that European leaders would act decisively at the summit.

One British bookmaker has adopted a similar outlook, offering gamblers three-to-one odds that the euro will cease to exist by the end of 2012.