UPDATE 2-Obama presses Spain's Zapatero over economic reform

Tue May 11, 2010 7:03pm EDT

* Obama engaged in helping to stem European crisis

* Obama, Zapatero discuss economic reforms

(updates with background)

By Jeff Mason

WASHINGTON, May 11 (Reuters) - U.S. President Barack Obama encouraged Spain on Tuesday to implement economic reforms seen as critical to helping prevent a European debt crisis from stalling U.S. and global economic recovery.

Obama called Prime Minister Jose Luis Rodriguez Zapatero to discuss the importance of "resolute action" by Spain, a country whose public finances, along with Portugal's, have caused the most concern after those of Greece, which secured a European bailout.

The White House said Obama was actively engaged in ensuring that Europe's debt crisis did not hurt the global economy.

Obama has held phone calls with German Chancellor Angela Merkel and French President Nicolas Sarkozy about the European crisis in recent days.

Obama's call on Tuesday adds a U.S. voice to European pressure on Zapatero, who has so far shied away from structural reforms opposed by trade unions but is now facing new calls from EU leaders to slash spending again and tackle his country's economic crisis.

Obama's spokesman Robert Gibbs said Spain was "one of the countries that ... because of some of their problems, need to undertake reforms that the prime minister is starting to work through."

European Union and International Monetary Fund officials pledged $1 trillion of emergency aid to weak euro zone countries early on Monday in return for action on public finances by Zapatero and his Portuguese counterpart.

The Spanish government said it would not draw on any of the emergency funds but promised on Monday to cut the budget deficit by a further 15 billion euros, 0.5 percent of gross domestic product, by 2011.

The White House said in a statement that Obama and Zapatero "discussed the importance of Spain taking resolute action as part of Europe's effort to strengthen its economy and build market confidence."

Obama expressed U.S. support for those efforts, the statement said.

Germany approved the biggest national contribution to the $1 trillion euro zone rescue package on Tuesday [ID:nN11120014] but investor skepticism overran initial euphoria over the plan, knocking the euro down and pulling most global share prices lower. [nN11268101]

Gibbs stressed that Obama had encouraged European Union leaders to take the steps necessary to address the crisis facing many of the 27-nation bloc's member nations.

"Our economic team and the president have been engaged over the course of many weeks in monitoring the situation that was going on with many of these countries, encouraging them to take the steps that are necessary to deal with it because of a fear that anything might stem the recovery that we believe is taking place," he told reporters.

"We continue to play a role in encouraging the Europeans ... to do what's necessary to ensure that this problem is dealt with and doesn't spread," he said.

(For other stories on the euro crisis, click on [EU/LOOK])

(additional reporting by Steve Holland and Axel Bugge; Editing by Cynthia Osterman)

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