A meeting of the G8 is set to take place at the weekend and it’s expected that the Eurozone crisis will be the main talking point. Obama is set to put pressure on the German chancellor Angela Merkel in an attempt to make her soften her stance on harsh austerity measures imposed upon many of the struggling Euro nations.
The meeting will also see the new French president Francois Hollande meeting many of the other G8 leaders face to face for the first time. Obama may see Hollande as a potential ally in his push for Europe to follow the US in giving a priority to expansionary policies, and as a counterweight to the Germans.
Warnings from credit rating agencies Fitch and Moody’s have put pressure on Obama as he seeks to protect America’s fragile recovery and win re-election in this year’s presidential elections.
Fitch said; “The downgrade of Greece’s sovereign ratings reflects the heightened risk that Greece may not be able to sustain its membership of economic and monetary union… In the event that the new general elections scheduled for 17 June fail to produce a government with a mandate to continue with the EU-IMF programme of fiscal austerity and structural reform, an exit of Greece from the EMU would be probable.”
Many investors are fleeing to safe haven currencies such as the Yen and the US dollar as a result of the situation. The Euro has dropped for three weeks in a row against the US dollar taking it to its lowest level in four months.
Alistair Darling, former Labour party chancellor said: “From my own experience, these things can blow up in a matter of hours. The slow bleeding of Greek banks should worry everyone. Europe for the last two years has been running round like headless chickens. It’s no wonder people now think things will go wrong.”
The Pound to Euro exchange rate is currently trading at 1.245
The Pound to US Dollar exchange rate is currently trading at 1.581
The Euro to US Dollar exchange rate is currently trading at 1.269
The Euro to Pound exchange rate is currently trading at 0.802
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