Barack Obama Addresses the G-20 from Position of Weakness

The economic weakening of the United States and the blockages in Congress mean that the U.S. president could only play a secondary role in Cannes.

Oh, how long ago seems the London G-20 summit in March 2009, where a Barack Obama basking in the glow of his electoral triumph took his first footsteps into the world arena, bringing with him hope for a renovated American leadership after the disappointments of the Bush era. At the time, the world held no grudge against him for the subprime crisis, the irresponsibility of Wall Street or the global financial debacle. He was the new boy — the “Black Jesus” who was going to repair the American house and its capitalist transgressions. Even if the French and the Germans refused to adopt his method of “economic stimulus” at the time, the U.S. president was the magnet to which all eyes were drawn.

But on Thursday in Cannes, Barack Obama will not at all be the center of debate among a circle completely focused on containing the damages of the Greek financial crisis and the structural fragility of the eurozone. If we were to believe a number of American analysts, he will be there almost as an observer of a scene wherein the European leaders are reduced to begging for $100 billion from China in order to reinforce their stabilization funds and patch up a monetary system threatening to explode.

Greek Grenade

It is not that the United States is not aware of the extent of the crisis — on the contrary. They understand perfectly well; as Undersecretary of the Treasury Lael Brainard reminded them on Monday, during a briefing at the White House, “the challenges of Europe will have substantial implications for the U.S. economy and the global economy.” The announcement of a Greek referendum this Tuesday on the bailout negotiated in Brussels has increased worries, with the Washington Post speaking of “a grenade” set off by a Greece threatened with “anarchy.” But “with American influence in decline” and “a deepening European crisis,” there is “not much” that Obama can do, Politico stated on Wednesday. “We are stakeholders, but we are not leaders,” confirms Healey Conley of the Center for Strategic and International Studies (CSIS).

The economic weakening of America, the blockages that the U.S. president stumbles over in Congress in order to pass his new employment plan and the negotiations over the debt largely explain the postponement. The 2009 recovery plan has not had the desired leverage effect. The level of unemployment remains at 9.1 percent, giving rise to doubts about the president’s capability of getting re-elected in a year’s time, even if he remains at the top of the polls with a favorable rating of 47 percent.

As a result, Europeans estimate, not without reason, that America is not especially well placed to give lectures. When President Obama, already collared for his lack of interest in Europe, travels across America speaking about “European headwinds” to explain the weakness in the American revival, he annoys them.

“Those from the United States criticizing Europe for being the ‘source of all trouble’ are stupefying, in view of their paralysis,” says an outraged Markus Wiener, a German journalist. Without denying the transatlantic polemic, a French source tempers this judgment, judging that Europeans and Americans have “passed the tactical stage of passing the buck concerning responsibility for the crisis, because they are in agreement over strategic issues which consist of re-launching growth and involving emerging countries.” But Obama’s interior paralysis sparks off doubt. After having expected a lot from the new administration, Europeans seem more and more tempted to see him not as the seductive president, but helpless in an America in decline.

Transatlantic differences

Of course, the White House defends itself for addressing the G-20 from a position of weakness. Barack Obama “is heading for France strong in the fact that we are pressuring Congress to act. He goes there as leader of the most important economy in the world,” reminded his spokesperson, Jay Carney. The Deputy National Security Adviser, Ben Rhodes, reminded on Monday that the number one American was himself “tightly coordinated” with Chancellor Merkel and French President Sarkozy, together searching for a cure to stamp out the Greek contagion. In the time since, Obama has greeted the found agreement, calling in the Financial Times to attack “structural” problems within the European system that has an efficient and unique currency but maintains 17 different national budgetary and fiscal policies. However, transatlantic differences remain, notably on taxes on financial transactions, which Sarkozy wishes to impose, but which American financial communities resist.

The Americans also seem in a hurry to know more about the foreseen participation of China in the EU financial stabilization fund, which is likely to create a dangerous European dependence on the giant Asian communist nation. Their goal in Cannes will be to put pressure on Beijing to demand a re-evaluation of yuan, in order to boost interior Chinese demand and to re-balance world commerce. On principle, Europeans are in agreement. But they will perhaps have difficulty in supporting the American approach as vigorously as they would have wished in view of their urgent need for Chinese billions.

On Wednesday, in the newspaper Politico, Simon Johnson, the former economist in charge of the IMF, summed up the situation in a brutal but no doubt pertinent way. “The Americans do not have money to put on the European table,” he said. “If they were to have a little bit of money to give, this could change the dynamic.”