Germany also has seen borrowing costs fall as investors sought the nation's debt as a haven from Europe's financial turmoil. The German 10-year bond yield was 1.22 percent at 4:08 p.m. London time after hitting an all-time-low of 1.127 percent on June 1.

Obama has to balance politics with the need to influence those leaders. He risks alienating Merkel at the very time he is asking her to ease up on her austerity push and sign off on more spending that could insulate the U.S.

"What does he gain by offending Merkel? Nothing," said Nariman Behravesh, chief economist at forecaster IHS Inc. and a former Federal Reserve official. "So what he's really trying to do here? He's trying to play it both ways. He risks a negative reaction on Merkel's part, which would be counterproductive."

The debate over stimulus versus austerity has dogged Obama throughout his presidency, as the U.S. recovers from the worst recession in more than seven decades. Romney is making it one of the central arguments of his campaign.

Stiglitz Analysis

Obama's approach was endorsed this week by Nobel Prize- winning economist Joseph Stiglitz.

History shows that the adoption of fiscal austerity when an economy is weak can have disastrous consequences, as happened in the U.S. in 1929 on the eve of the Great Depression, Stiglitz told Bloomberg editors and reporters in New York yesterday.

Romney risks making that same sort of mistake by backing a plan to tighten federal spending, said Stiglitz, who was chairman of Clinton's Council of Economic Advisers from 1995 to 1997.

The next several weeks are critical for the global economy, with a second round of elections in Greece and a Group of 20 summit in Mexico this month. Finance ministers and central bank governors from the world's leading economies today agreed to coordinate their response to Europe's financial crisis on a conference call that dealt with Spain and Greece.

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