Barack Obama predicts global fallout on euro crisis

He said European leaders must inject capital into the banking system.

“The solutions to these problems are hard, but there are solutions,” Mr Obama said at the White House.

The president also renewed his call for Congress to quickly pass legislation that he says will put construction workers, teachers and others back to work.

The president spoke after several days of difficult turns in his re-election prospects, including last Friday’s report that the unemployment rate had risen slightly to 8.2 per cent in May as job creation had slowed, and new signs that the European debt crisis was hurting the US economy.

In the political realm, former president Bill Clinton stirred controversy. Mr Clinton said the president should be ready to sign a short-term extension of all expiring tax cuts, including those that apply to the wealthiest taxpayers which the president has vowed not to renew.

In his brief White House news conference, Mr Obama also mentioned Greece, where elections are taking place in a week’s time, which could determine whether Athens leaves the eurozone.

He cautioned Greece that withdrawing from the eurozone would mean even greater economic difficulty than the austerity steps already undertaken.

In his opening remarks, Mr Obama stressed the importance of a strong European economy, saying: “If there’s less demand for our products in places like Paris or Madrid it could mean less business for manufacturers in places like Pittsburgh or Milwaukee.”

The president’s call came as Spain indicated it could decide this month whether to request a bailout for its troubled banking sector.

Deputy prime minister Soraya Saenz de Santamaria said yesterday the government will not act until receiving evaluations from the IMF on Monday and then two independent auditors Spain has hired.

The economy ministry said on the government website the second of these evaluation is expected by 21 June at the latest.

The official said after a Cabinet meeting that no decision on a bailout has been taken.

Commenting on reports that eurozone finance ministers will hold a conference call today on Spain, Ms Saenz de Santamaria said “no meeting is planned”.

She would not confirm or deny whether some kind of contact would take place. The step would make Spain the fourth country in the 17-member eurozone to seek help since the EU debt crisis broke out.

“Once the estimates of the numbers are known with regard to what the financial sector might need, the government will state its position,” Ms Saenz de Santamaria said.

Ms Saenz de Santamaria declined to say how much the sector, hit by the collapse of the country’s real estate bubble, might need.