Antonis Samaras's victory in Greece was a bit of good news for the White House. | REUTERS Greece no end to Obama Europe woe

Greece’s election results Sunday were a relief for the White House, but the challenges of a debt-burdened Europe could still derail the U.S. economy and President Barack Obama’s reelection hopes.

And the administration doesn’t have any control over those, either.


The next critical test begins Monday with the G-20 meeting of world economic powers in Mexico. The narrow triumph of the pro-bailout New Democracy Party in Greece will be at the forefront of initial discussions in the beach resort town of Los Cabos.

( PHOTOS: G20 Summit in Mexico)

The result is likely to produce some relief among political leaders in attendance, including Obama and Treasury Secretary Timothy Geithner, who have spent long hours together in the Oval Office discussing the European crisis and what the U.S. can do to help avoid catastrophe.

What the White House wants is shock and awe. What it has mostly gotten so far is kick the can down the road, and not very far.

Neither the U.S. nor any other big economy can force Germany to accede to taking on greater risk in the interest of European and global stability. And no one can force debtor nations such as Italy to accept the often painful structural reforms necessary as both a condition of bailout funds and a path to long-term fiscal viability.

Still, the Greek results should also at least temporarily ease the minds of global investors who feared a win by the hard-left Syriza party would spark a quick Greek exit for the euro zone followed by collapse of the common currency and possible global bank failures and widespread recession. All of that is now less likely in the short-term. The euro and U.S. stock futures gained in the initial hours after the Greek result became clear. They could advance further Monday in a relief rally.

But problems in Greece are not solved—there is still massive debt, crippling recession and the matter of forming a functioning government. The Syriza party has already refused to take part in any “national salvation” government. And the wider European crisis continues to fester with no resolution in sight, presenting perhaps the biggest single challenge to Obama’s re-election efforts.

“Greece avoided driving a really broken-down, rickety car into a wall. But they are still left with the broken-down rickety car and no solution,” said Tony Fratto, managing partner at Hamilton Place Strategies and a Treasury and White House official under President George W. Bush. “Everything has changed and nothing has changed. That’s not just the reality for Greece but also for the rest of Europe. Avoiding an immediate crisis is not that same as fixing your problem.”

Right now the European crisis is hitting the U.S. mainly as a drag on both business and consumer confidence. The University of Michigan/Reuters gauge of consumer sentiment fell in June to its lowest level of the year. Unemployment at the both the state and national level is starting to tick back up again, in large measure because businesses fear the uncertainty created by the European crisis. Why hire more workers and expand production if you think the global economy is in trouble and consumers won’t have the money to buy your products?

The impact that Europe is having on the U.S. stock market is already damaging the president’s prospects — nearly every dip of the Dow has been followed by a decline in the president’s poll numbers. Mitt Romney need not even talk much about the European crisis—and he doesn’t—in order to capitalize on it. A softer U.S. economy almost automatically benefits Romney and hurts the president.

The White House acknowledged the election was just one small step in its statement after the vote.

“We hope this election will lead quickly to the formation of a new government that can make timely progress on the economic challenges facing the Greek people,” White House press secretary Jay Carney said. “As President Obama and other world leaders have said, we believe that it is in all our interests for Greece to remain in the euro area while respecting its commitment to reform.”

The smaller G-7 group of economic powers—which includes euro zone members Germany, France and Italy—also issued a modestly worded statement. “Taking note of the Greek elections, we look forward to working with the next government of Greece, and believe that it is in all our interests for Greece to remain in the Euro area while respecting its commitments,” the statement said, tracking closely with the White House statement.

Of course, Greece was never Europe’s biggest problem. As one of the smallest economies in the eurozone, it’s not even close.

Far more daunting to Europe—and the White House—are problems facing Spain and Italy, whose economies both dwarf that of Greece. Spain has already required one bailout of its teetering banks. And Italy has the second biggest debt burden in Europe after Greece and has seen its government borrowing costs soar to near six percent, considered close to the danger zone for possible default.

“Could Europe bailout Spain if it had to? Maybe. But Italy is probably just too big to bailout,” said Michael Obuchowski, chief investment officer at First Empire Asset management.

No grand plan for saving Europe is likely to come out of the G-20 summit. That would likely wait for a gathering of European leaders scheduled for June 28 and 29.

The administration is still pushing hard for more firm commitment at the G-20 meeting—especially from rich and powerful Germany—for a tighter European political union. They also want to see at least some clear progress towards market-appeasing steps that could include the issuance of bonds backed by the entire euro zone, deposit insurance for all banks in the region and a far bigger bailout fund to make it clear that no government or banking system in the region will be allowed to fail.

The discussions have become even more complex with France electing a socialist prime minister and parliament and pushing for new growth initiatives to be included as a party of any bailout packages, including the one currently in force in Greece.

The lack of influence by the U.S. in the European crisis is less a reflection of the reduction of Uncle Sam’s global might than it is of the nature of the problem itself, which is not a lack of resources but a lack of political will.

“It’s not like the Asian crisis [in the 1990’s] where outside resources were absolutely necessary and thus brought outside influence to bear. Resources are not the problem, here,” Fratto said. “These are rich countries, they have the resources.”

The question is whether they can find a way to begin to use those resources and put structural reforms in place—or at least begin clear movement toward them—in a way that forestalls both a short-term cataclysmic default and ends the grinding pressure on markets and investor and consumer confidence that is harming the U.S. recovery.

A sweeping set of changes for Europe, perhaps discussed at the G-20 and then more formally introduced at the E.U. summit later this month, could go a long way to reversing the slide for the both the market and for Obama.

The other two alternatives are a continued slow-bleed in Europe that leaves the president in danger of losing or a catastrophic crisis brought on by a big European default, which would make it nearly impossible for the president to win.

The Greek vote made the second outcome less likely. But it did nothing about the first one.