Obama: European debt crisis must not slow growth

[Gerald]

US President Barack Obama has said the European debt crisis cannot be allowed to threaten the global economy, following White House talks with German Chancellor Angela Merkel.

The leaders that the euro zone troubles "cannot be allowed to put the global economic recovery at risk," he said.

The pair discussed Nato operations in Afghanistan and Libya, the Middle East peace process and economic issues.

Later, Mr Obama was to award Ms Merkel the Presidential Medal of Freedom.

'Peace and prosperity'

Mr Obama has previously said that the problems affecting the eurozone are one of a number of foreign "headwinds" affecting the US economy.

Government debt as a proportion of GDP has soared among eurozone nations in recent years, reaching as high as 142% of gross domestic product in Greece in 2010.

Some affected countries have undertaken austerity measures that some fear will hinder economic growth.

Greece, Ireland and Portugal have received international bailouts, and Moody's this month put Greece's risk of defaulting on its sovereign debt at 50%.

Speaking at a joint White Hosue news conference on Tuesday Mr Obama said Greece's debt was "significant" but said the country was undertaking "difficult steps" to improve its situation.

He said the country must make structural reforms to make its economy more competitive in attracting foreign investment.

And he warned of an "uncontrolled spiral" if the eurozone countries were allowed to default on their debt.

Ms Merkel was welcomed on Tuesday morning at the White House with pomp and ceremony, and the two leaders hailed co-operation between the two nations.

"The transatlantic alliance is the cornerstone - is the heart - of our efforts to promote peace and prosperity around the world," Mr Obama said on Tuesday morning when Ms Merkel arrived, "and Germany - at the heart of Europe - is one of our strongest allies."

http://www.bbc.co.uk/news/world-us-canada-13685707


Note: 7 June 2011 Last updated at 17:02 GMT