A flurry of meetings between European Union officials and principals of the U.S. government came on the heels of fresh warnings Monday that the European debt crisis threatens to spark a global recession.
Senate Majority Leader Harry Reid (D-Nev.) and senators from both parties met with officials from Brussels to discuss the evolving crisis, signaling a level of engagement that is a shift from the low-key approach Congress has adopted on the matter.
President Obama, whose reelection hinges in part on an upswing in the economy, said the U.S. was “very actively engaged” with European officials and stood “ready to do its part” to avert the crisis, while Treasury Secretary Timothy Geithner and Secretary of State Hillary Clinton were among the administration officials involved in the discussions.
While U.S. markets surged Monday on the strength of holiday shopping, a sense of urgency to the bilateral talks was strengthened by a pair of gloomy reports.
The Organization for Economic Cooperation and Development (OECD) slashed its expectations for global economic growth, saying Europe’s debt woes threatened to throw the entire world into another recession.
Separately, Moody’s Investors Service warned the situation was worsening for all European nations, leaving the EU’s monetary union on the brink of falling apart.
The annual U.S.-EU summit is typically a routine affair, but the circumstances surrounding Monday’s meetings lent a heightened atmosphere to the event.
The OECD, an international economic group based in Paris, warned that the world’s economy had “deteriorated significantly,” due primarily to the growing problems in Europe.
If those sovereign debt problems are not dealt with soon, the looming $1.2 trillion in automatic spending cuts in the U.S., triggered by the deficit supercommittee’s failure to reach a deal, “could tip the [U.S.] economy into a recession,” the OECD said.
A worst-case scenario would have “highly devastating outcomes” for the global economy, especially the U.S., which would see “marked declines” in economic activity, the OECD said.
U.S. and European officials acknowledged in a joint statement that the global economy had entered “a new and difficult phase,” but welcomed European efforts to stifle the debt crisis, as well as American attempts to get its fiscal house in order.