Debt crisis and IMF to dominate Obama, Merkel talks

Tue Jun 7, 2011 12:24am EDT

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* Differences over foreign and economic policies

* Obama to present Merkel with Medal of Freedom

By Jeff Mason and Andreas Rinke

WASHINGTON, June 7 (Reuters) - U.S. President Barack Obama and German Chancellor Angela Merkel will air their differences over fiscal policy, the Eurozone crisis and the war in Libya on Tuesday in a meeting meant to illustrate a strong partnership.

The two leaders will meet amid the pomp and circumstance of an official visit and a formal state dinner, but the shadow of global economic and security problems still looms.

Obama and Merkel have not hidden their disagreements in the past. Obama favored more government stimulus spending during the global economic crisis while Merkel pressed for fiscal austerity. The United States endorsed military action in Libya; Germany confounded its NATO partners by refusing to take part.

The Eurozone debt crisis may be the latest issue the two leaders will tussle over. Obama cited the crisis as one in a handful of foreign "headwinds" affecting the U.S. economy.

But as Greece started a campaign to secure a new international bailout, Obama's administration made clear it expects Europe -- and, by default, wealthy Germany -- to take care of the problem. [ID:nLDE7550KZ]

Asked whether the United States would back using additional International Monetary Fund money to help Greece further, White House spokesman Jay Carney said Europe had the means to help Greece on its own.

"They have said that they will do whatever is necessary to tackle this problem and we believe it is completely within their capacity to do that," Carney said.

Washington faces a debt challenge, too, and Merkel could rebuff Obama's calls about Greece by saying the United States must get its own fiscal problems under control.

The White House is leading talks with Republican and Democratic lawmakers to try to agree a deal on long-term deficit reduction.

Merkel is also expected to emphasize Europe's support for French Finance Minister Christine Lagarde's candidacy to replace Dominique Strauss-Kahn as IMF chief.

The United States has not offered public support for Lagarde, saying instead it wants to see the best candidate get the job -- a nod to developing countries, who object to Europe's traditional hold on the position.

Obama will present Merkel with the Medal of Freedom -- the highest U.S. civilian award -- during her visit.

He said in an interview with a German newspaper that the two leaders would not always see eye to eye.

"We don't always agree on everything; no two allies do," he told Der Tagesspiegel. "But in our meetings and discussions, we always speak honestly and openly, as close friends should, and I believe that our approach to shared challenges is stronger because of it." [ID:nN05221411] (Editing by Christopher Wilson)

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