Barack Obama is to put pressure on Germany to ease the pain of austerity with policies to boost growth, as he uses two days of talks with the G8 industrial nations to warn Europe that it needs to act swiftly to spare the world economy from a second deep recession in four years.
Prior to the G8 summit at Camp David this weekend, a warning from the ratings agency Fitch that Greece's days in the single currency could be numbered heightened fears in Washington that the worsening crisis in the eurozone poses a threat to America's fragile recovery and President Obama's re-election chances.
Obama will welcome the new French president, François Hollande, as a potential ally in his push for Europe to follow the US in giving a higher priority to expansionary policies, and as a counterweight to the German chancellor, Angela Merkel.
Obama can expect support from David Cameron, who told Merkel and Hollande on Thursday that eurozone leaders must embark on a series of urgent steps to prop up the single currency if a major implosion across the continent is to be avoided.
In a video conference with fellow EU leaders, the prime minister warned of a "remorseless logic" which dictates that struggling members of a single currency are supported by stronger members.
"The prime minister emphasised the importance of Greece and the eurozone taking decisive action to ensure financial stability and prevent contagion," a Downing Street spokesperson said. The video conference included Mario Monti, the Italian prime minister, José Manuel Barroso, the European Commission president, and Herman van Rompuy, president of the European Council.
Investors again turned to safe havens, fearing political chaos and economic collapse in Greece having knock-on effects for the global economy. Spain was the main focus of concern, amid reports – denied by the economy minister – of a run on Bankia, the country's fourth-biggest bank. Fitch waited for European markets to close before downgrading Greece's credit rating from B- to CCC.
"The downgrade of Greece's sovereign ratings reflects the heightened risk that Greece may not be able to sustain its membership of economic and monetary union (EMU) ... In the event that the new general elections scheduled for 17 June fail to produce a government with a mandate to continue with the EU-IMF [International Monetary Fund] programme of fiscal austerity and structural reform, an exit of Greece from EMU would be probable," Fitch said.
Leaders of the west's most powerful economies have been meeting for informal talks every year since the oil shock of 1973 brought an end to the postwar boom, and while Obama is not expecting any major decision to emerge from Camp David, it will be a chance for the Americans to vent their frustration that Europe has failed to find a lasting solution to its debt crisis, which is now in its third year.
In Greece, there were hopes that the deposit outflows from banks had reduced. But Stuart Gulliver, chief executive of Britain's biggest bank, HSBC, said: "We're in a worse place than we were a week ago. It remains a very difficult thing to call. I think the second [Greek] election in June will be a referendum on whether to stay in the euro. A month is a very long way away. We are now seeing price action that is consistent with capitulation."
Gulliver said if Greece left the eurozone, a firewall would need to be erected around Spain. If there was a run on banks in Greece, it might not be possible to wait for the elections on 17 June. He said his biggest worry "is absolutely how the eurozone plays out – whether Greece stays in, whether firewalls are high enough to protect Spain and, frankly, whether markets take things into their own hands before 17 June".
Alistair Darling, Labour's chancellor at the time of the Lehman Brothers collapse, said:
"From my own experience, these things can blow up in a matter of hours. The slow bleeding of Greek banks should worry everyone. Europe for the last two years has been running round like headless chickens. It's no wonder people now think things will go wrong."