European economic woes visit Obama as he hosts G-8 summit at Camp David

President Obama is set to host global leaders this weekend at Camp David, where the European debt crisis threatening the global economy and Obama’s reelection will overshadow everything else.

The president’s reelection largely hinges on the economy, and the crisis in Europe is a growing danger if he is to avoid the fate of other international leaders run out of office due to economic woes.

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Obama will be reminded of that danger on Friday when he hosts newly elected French President Francois Hollande at the White House. Hollande is one of several leaders making their G-8 debuts at Camp David; all came to office in part because of voter dissatisfaction with the predecessor’s economic records.

Obama, under attack this week from presumptive GOP presidential nominee Mitt Romney and Speaker John Boehner (R-Ohio) for his handling of the economy, is determined to avoid the same fate.

National Security Adviser Thomas Donilon highlighted the urgency of Europe during a Thursday briefing with reporters previewing the G-8. 

“The economic situation in the eurozone is going to be at the top of the agenda,” Donilon said. 

The U.S. has an “extraordinarily significant stake” in Europe’s management of the economic crisis, Donilon said, and Obama looks forward to “leading the discussion” with global leaders at the weekend’s meeting.

“It’s important for them to agree on the common goal, which has to be — it, has to be to preserve the foundation of the eurozone,” he said.

A central question facing Europe is whether Greece will be able to retain its membership in the European Union and keep the euro as its currency.

Greece’s departure from the eurozone would throw Europe into uncharted territory, which in turn would inject huge amounts of uncertainty into global financial markets — the last thing the still-struggling U.S. recovery needs. 

 The Dow Jones Industrial Average fell 156 points on Thursday, largely on worries about Europe. It was the 11th trading day out of 12 the market has experienced a loss.

Greek voters earlier this month threw their support behind parties that opposed the tough bailout agreement hammered out by the two parties that previously ran the coalition government. 

Now, with the government in disarray, a fresh election has been called for June 17, with many viewing Greece’s existence in the EU as being at stake.

Fitch Ratings downgraded Greece on Thursday, citing the “heightened risk” that the nation will leave Europe’s monetary union. If the new elections fail to produce a government that can meet the austerity plan mandated by European officials and the International Monetary Fund, Greece’s exit is “probable,” according to the credit rater.

Christine Lagarde, managing director of the IMF, told a Dutch public television station that a Greek departure would be “extremely expensive, and not just in Greece.”

Greece’s exit would throw into question the overall stability of the eurozone, as investors begin to look to other ailing nations like Spain and Ireland, wondering if they might be the next to follow suit.

 “It’s actually a break point in terms of changing people’s psychology,” said Michael Klein, a nonresident scholar at the Brookings Institution. “As bad as things have been over the last two years now, the fact that no country has yet exited probably has in some ways bolstered people’s hopes that Europe could pull through.

“Once one country exits, the possibility of a second country exiting or a third looms much larger,” added Klein, a professor of international economic affairs at the Fletcher School at Tufts University.

Europe looms as a significant threat to greater growth in the U.S. economy, yet it’s not clear what, exactly, Obama can do about it.

“We’re not in this game, quite frankly,” said Heather Conley, senior fellow and director of the Europe Program for the Center for Strategic and International Studies. “We are going to have to watch how this plays out with the frustration in recognizing that it will have a profound impact for the global economy and for the U.S. economy.”

While the debt crisis will dominate Obama’s talks, Afghanistan and next week’s NATO meeting in Chicago are also on the agenda. The Obama administration has for months labeled the meeting as a key moment in moving toward the end of the war in Afghanistan.

 Members will address key issues facing Afghanistan after 2014, when NATO hands off security control to the Afghans.

Donilon said the Obama administration has estimated it will cost $4 billion per year to fund the Afghan security force, and the United States is actively seeking funding from other countries to share in the burden.

 The world leaders will also talk about what the NATO force post-2014 will look like, Donilon said.

While Obama and Afghan President Hamid Karzai signed a strategic partnership agreement that would establish a U.S. presence in Afghanistan through 2024, the agreement did not say how many U.S. troops would remain for training and special-operations missions.

Obama and Karzai are planning to meet face to face Sunday, ahead of the NATO summit.

France’s Hollande presents a new challenge for the president on Afghanistan, as he campaigned on withdrawing French troops from Afghanistan in 2012.