As a presidential candidate, Barack Obama promised to revitalize America's image in the world and begin a new phase of U.S. leadership.
The tottering global economy will put that pledge to the test during his first major foreign trip as president.
Obama's goals for this week's Group of 20 summit in London are two-fold: making sure countries are taking action to boost growth and advancing a longer-term regulatory overhaul to avoid a future financial crisis.
But one important task will be simply keeping potential disagreements from bubbling to the surface and damaging already-fragile market confidence.
"President Obama is not only confronting the biggest challenge he faces, he's doing it for the first time on this type of world stage," said Steven Schrage of the Center for Strategic and International Studies. The new president will have to avoid deepening underlying divisions with his fellow leaders and instead move to bridge those divisions, Schrage said.
Obama leaves Washington Tuesday morning for London, where he will participate in the one-day G-20 summit Thursday. He will sit down for the first time with Chinese President Hu Jintao and Russian President Dmitry Medvedev. He will also meet with U.K. Prime Minister Gordon Brown and Queen Elizabeth II.
After London, the president will attend the NATO summit in Strasbourg, France, and the European Union summit in Prague. The trip will end with meetings and a roundtable in Turkey. Along the way, Obama will meet a host of leaders and answer students' questions at a town hall in a basketball arena in Strasbourg. Obama is even more popular in Europe than in the U.S.
The most urgent business will be conducted in London, where officials from the world's biggest developed and developing economies will consider ambitious plans to end the global recession and revamp regulations blamed for the financial meltdown. Because the gathering is just one day long, expectations for concrete action are limited.
"The president and America are going to listen in London, as well as to lead," White House spokesman Robert Gibbs said Saturday.
The White House is playing down divisions with other countries on emphasis of fiscal stimulus versus the regulatory overhaul. European leaders, notably German Chancellor Angela Merkel and French President Nicolas Sarkozy, voiced skepticism over additional deficit spending. They've instead endorsed tighter supervision of financial institutions and markets.
"The press has tended to frame this as an 'either/or' approach," Obama told the Financial Times on Sunday. "I have consistently argued that what is needed is a 'both/and' approach. We need stimulus and we need regulation."
The White House doesn't have a "sacrosanct" figure for fiscal stimulus, said Mike Froman, deputy National Security Advisor for International Economic Affairs. The G20 financial ministers already have agreed to do "whatever is necessary," he added. G-20 members have committed to stimulus measures totalling 1.8% of gross domestic product.
"Despite the back-and-forth in the press on this issue, nobody has asked and nobody is asking any country to come to London to commit to do more right now," Froman told reporters Saturday.
Besides highlighting fiscal stimulus efforts, the U.S. wants leaders from Thursday's summit to agree on improving lending and credit availability while minimizing the spread of the economic crisis in emerging economies. The U.S. also wants a G20 final statement to take a strong stance against protectionism.
On the regulatory side, the U.S. wants to expand oversight to systemicly important institutions, including hedge funds. It also wants agreements on new principles for capitalization and enhancement of cross-border cooperation among regulators and supervisors.
Analysts say those issues are too complex to be resolved in London.
Fixing complex issues such as systemic risk or improving bank capital standards is very complicated.
"It's going to take a long time to do, and if you try to do it internationally it will take even longer than if you tried to do it nationally," Sebastian Mallaby, senior fellow for international economics at the Council on Foreign Relations, told reporters last week.
Administration officials also said the summit will target tax havens. The G-20 will discuss "things that can be done to encourage them to adopt international standards of behavior around transparency and disclosure," Froman said.
Obama's most delicate diplomacy in London may come during his meetings with Hu and Mededev. Chinese and Russian officials have recently discussed the idea of a new global reserve currency to supplant the dollar. Such comments have made waves in financial markets, but aren't viewed as realistic.
-By Henry J. Pulizzi, Dow Jones Newswires; 202-862-9256; henry.pulizzi@dowjones.com
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