President Obama was "encouraged by what he heard" from Angela Merkel on Monday at the G20 Summit in Mexico, where he urged the German Chancellor and other European leaders to move forward after the “positive prospect” of Greece’s election.
White House press secretary Jay Carney said Obama and Merkel agreed to work closely in the coming months as Germany helps manage the European crisis, which threatens the U.S. economy and Obama’s own reelection hopes.
Yet the markets were far from exuberant Monday, as anxiety over the hefty challenges that lie ahead dominated trading sessions. Stocks were largely flat, with the Dow Jones Industrial Average closing down 0.2 percent while the NASDAQ and S&P 500 were up 0.8 percent and 0.1, respectively.
“This was supposed to be a relief rally, and it’s turned into a disbelief rally, or lack thereof,” said Daniel Alpert, managing partner at Westwood Capital.
The Greek result leaves Obama with few moves to make in terms of boosting the economy, even as it plays a vital role in his odds at reelection.
While the Greek election results were a positive omen for the nation’s efforts to remain in the eurozone, they are better characterized as a successfully avoiding catastrophe than a rousing success.
Whatever leader emerges from a Greek coalition government faces a daunting challenge. Polling has shown most Greeks want to stay in the eurozone, but resist the harsh austerity plan mandated by the bailout agreement. Now, Greece’s new government must find a way to balance the wants of the people with the global leaders casting out the lifeline.
And that does not even address the looming threats posed by nations like Spain, Italy and Ireland, which are far from rock solid and far more integral to Europe’s economy.
“There’s a lot of uncertainty about what the solution is,” said Mark Copelovitch, an assistant professor of political science and public affairs at the University of Wisconsin at Madison, who specializes in the politics of the world economy. “Investors are savvy and they realize this is a short-term solution and not a permanent fix.”
On the international front, there is little if anything the White House can do to move along European officials beyond consistent urging. Messy political dynamics have bedeviled the European Union since the crisis began a year and a half ago, and have made a dramatic bailout like the one America adopted in a matter of days in response to its own crisis an impossibility.
“Europe doesn’t move towards the light, they move away from the heat,” said Andrew Busch of BMO Capital Markets.
It’s a dynamic that has frustrated U.S. political leaders and Wall Street alike.
“I think there’s some sort of exasperation in terms of the Europeans not being able to get their act together on this, and some frustration with Merkel where the administration has to be thinking, ‘You have to say yes to something,’” Copelovitch said.
That leaves the White House focused on how to strengthen the domestic economy.
But even here, there are few positive signs. The disastrous May jobs report has been just one in a series of disappointing points of recent economic data. And the political standoff over the nation’s policy has produced little in terms of major legislation focused on the economy, even as major fiscal issues loom after the election.
“This is not a Europe problem and if the administration makes the mistake of thinking this is a Europe problem, I think that they’re going to run out of room on that argument… because the economy will show its true colors,” said Alpert. He said the U.S. should avoid “painting ourselves as victims when we really should be dealing with the essential issues that are facing us.”
Most Europe watchers expect the continent’s woes to continue for months, beyond Election Day in November. With no end in sight as the campaign ramps up, observers say the president must be frustrated.
“This is a really big problem for the White House,” said Julian Zelizer, a professor of history and public affairs at Princeton University. “Going into the election with these wild swings is very unsettling for any president.”
“It’s a problem they have no control over,” he added.