Tuesday

7th Jul 2020

Obama endorses French ideas ahead of EU summit

  • Obama: 'I think about my one Congress, then I start thinking about 17 congresses and I start getting a little bit of a headache' (Photo: whitehouse.gov)

US leader Barack Obama has effectively taken France's side against Germany in the EU debate on the financial crisis.

Speaking to press in off-the-cuff remarks after a Nato summit in Chicago on Monday (21 May), he endorsed three ideas championed by France on how to stop Greek contagion and how to prevent recession from bringing down Italy or Spain: a massive EU bail-out fund; lower interest rates; and an EU-level strategy on growth.

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"We've got to put in place firewalls that ensure that countries outside of Greece that are doing the right thing aren't harmed just because markets are skittish," he said.

"We've got to make sure that there is a growth strategy to go alongside the need for fiscal discipline, as well as a monetary policy that is promoting the capacity of countries like a Spain or an Italy that have put in place some very tough targets and some very tough policies, to also offer their constituencies a prospect for the economy improving."

In a fourth point, he urged the Union to recapitalise its banks "so that investors have confidence."

Without naming names, he also criticised Germany's step-by-step way of handling developments so far. "Acting forcefully rather than in small, bite-sized pieces and increments, I think, ends up being a better approach," he noted.

Looking back to the G8 summit over the weekend, which included French President Francois Hollande and German Chancellor Angela Merkel, Obama said there is "a consensus across the board" on the crisis.

But his remark masks divisions between Paris and Berlin ahead of an EU summit in Brussels on Wednesday.

Hollande has threatened to block ratification of the Merkel-inspired EU fiscal discipline treaty unless she agrees to a new growth strategy alongside austerity measures.

The German Chancellor has opposed French proposals to increase the EU bail-out fund or "firewall" to a size big enough to cope with an Italian or Spanish meltdown. She has also ruled out French ideas on changing the mandate of the European Central Bank to stimulate growth with "monetary" policy on lower borrowing costs from its current remit of keeping down inflation.

With Obama himself at risk in upcoming US elections if the euro-crisis hits the US economy, he added: "What happens in Greece has an impact here in the United States. Businesses are more hesitant to invest if they see a lot of uncertainty looming across the Atlantic."

He noted that the White House has offered EU leaders "technical assistance [to] work through some of these ideas in terms of how we can stabilise the markets there."

He also highlighted an intrinsic problem in the eurozone set-up.

"Of course, they've got 17 countries that have to agree to every step they take. So I think about my one Congress, then I start thinking about 17 congresses and I start getting a little bit of a headache," he said.

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