–Eurozone Debt Default Spiral Would be Disastrous
–Not Worried About Double-Dip Risk But Recovery Must Accelerate
–Germany’s Merkel: In Interests of All to Ensure Eurozone Stability

By Heather Scott

WASHINGTON (MNI) – President Barack Obama Tuesday said the nations
in the Eurozone will need to provide a “backstop” for Greece given that
nation’s debt level, since a spiral of defaults would be “disastrous.”

And German Chancellor Angela Merkel said at a joint press
conference following their bilateral meeting that it is in the interests
of all countries in the eurozone to ensure the problems in one country
do not harm the stability of the single currency, despite the treaty
prohibition on bailouts.

In addition, while Obama acknowledged that the U.S. economic
recovery needs to accelerate and create more jobs, he is not worried
about the possibility of falling back into recession.

“I’m not concerned about a double dip recession. I am concerned
about the fact that the recovery that we’re on is not producing jobs as
quickly as I want it to happen,” Obama said.

He said the U.S. economy is obviously experiencing some headwinds,
notably high gasoline prices, and after three months of strong private
sector job growth the latest month showed a slowdown, though it remains
to be seen if that is “a one month episode.”

With over two million jobs created in last 15 months and a “rebound
in the manufacturing sector,” led by U.S. auto companies, there are
signs the economy is on the right path, he said, “But we’ve still got
some enormous work to do.

Longer term challenges include “getting a handle on” the federal
debt and deficit, and ensuring the economy is competitive, Obama said.

“We’re on the path of recovery but it’s got to accelerate.”

Despite the difficult politics of finding a solution for Greece,
Obama said he is confident in Germany’s leadership to find a way to make
the Greek debt more manageable, “But it’s going to require some patience
and some time.”

He stressed that “America’s economic growth depends on a sensible
resolution of this issue,” and warned, “We think it would be disastrous
to see an uncontrolled spiral of default in Europe.”

While acknowledging the tough problem of finding a solution for
Greece and the steps the government there is taking, Obama made it clear
fellow eurozone members and creditor will have to be involved in the
solution, though he did not mention restructuring.

“Given their level of debt it also means that other countries in
the eurozone are going to have to provide them a backstop in support,”
Obama said. “And frankly, people who are holding Greek debt are going to
have to make some decisions … about how that debt is managed.

Merkel said the eurozone leaders recognize the economy’s importance
to the stability of the global economy, and said they will live up to
their responsibilities.

But within the area, “We’ve seen a that the stability of the euro
as a whole will also be influenced if one country is in trouble,” she
said.

“It is in each and every country’s vested interest to see to it
that this common currency area is not endangered, and we will act in
such a way that sustainability is guaranteed,” Merkel said.

Asked about the situation in Libya, Obama said there has been
“significant progress,” and “it is just a matter of time before Gadhafi
goes.”

Merkel agreed and said Germany supports the NATO mission there.

** Market News International Washington Bureau: 202-371-2121 **

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