Obama says Europe must act to keep economic crisis from spreading, worsening

WASHINGTON – President Barack Obama urged European leaders to prevent a looming overseas debt crisis from dragging down the rest of the world.

He said European must inject money into the banking system.

“The solutions to these problems are hard, but there are solutions,” he said.

The president spoke after several days of difficult turns for his re-election prospects, including last Friday’s report that the unemployment rate had risen slightly to 8.2 per cent in May as job creation had slowed, and new signs that the European debt crisis was hurting the U.S. economy.

Market attention is currently focused on Spain whose banks need billions of euros in bailout funds and where unemployment is at a eurozone high of 24 per cent and the economy is stretched to the breaking point.

The Spanish government appears to have resigned itself to the fact the banks need a bailout. Prime Minister Mariano Rajoy has moved on from firmly stating that “there will be no rescue of the Spanish banking system” 10 days ago to avoiding ruling out seeking external help for the banking sector of Europe’s fourth largest economy.

Spain has been criticized for being too slow to set out a road map to resolve its problem. European business leaders and analysts have stressed that Spain must find a solution quickly so that it is not caught up in any market turmoil after the Greek elections on June 17.

In his brief White House news conference Obama also mentioned Greece where the elections could determine whether Athens leaves the eurozone, particularly if the anti-bailout left-wing Syriza becomes the largest party in parliament..

He cautioned Greece that withdrawing from the 17-nation eurozone would mean even greater economic difficulty than the austerity steps already undertaken.

In his opening remarks, Obama stressed the importance of a strong European economy, saying “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.”