--Obama says it's in everyone's interest for Greece to remain in euro

--Obama says Europe should inject capital into weak banks

--Says euro zone should deepen collaboration

(Updates with comments from President Obama throughout.)

 
   By Jared A. Favole 
 

WASHINGTON--President Barack Obama on Friday said the euro zone needs to take decisive steps to inject capital into its weak banks and deepen collaboration on its financial system and budgets to stem the financial crisis.

"The bottom line is the solutions to these problems are hard, but there are solutions," Mr. Obama said from the White House. He later added, "the sooner that they act and the more decisive and concrete their actions, the sooner people and markets will regain some confidence, and the cheaper the costs of cleanup will be down the road."

Mr. Obama also said it's in "everybody's interests" for Greece to remain in the euro zone. "We recognize the sacrifices that the Greek people have made," Mr. Obama said. He said the "Greek people also need to recognize that their hardships will likely be worse if they choose to exit from the euro zone."

Concerns about whether Greece will exit the euro and questions about the health of banks in countries such as Spain have spooked markets in recent weeks. Mr. Obama said he is in constant contact with European leaders over the crisis.

Mr. Obama said he is seeing positive signs that talks of solving the crisis, including from German Chancellor Angela Merkel and French President Francois Hollande, have moved toward coupling growth with austerity measures.

The euro-zone crisis and health of the overall U.S. economy threaten Mr. Obama's re-election chances, and he and his campaign have stepped up pressure on Congress to pass some a series of economy proposals he offered last year to help teachers, first responders and construction workers get back on the job.

He said the euro zone can learn from the U.S. and vice versa. He said if countries are "just cutting and cutting and cutting, and their unemployment rate is going up and up and up, and people are pulling back further from spending money because they're feeling a lot of pressure, ironically that can actually make it harder for them to carry out some of these reforms over the long term."

He said Europe is in "danger" of getting into a pattern of heavy cuts that will crimp growth, while he praised Italy and Spain for making smart structural reforms to its governing and financial system.

Mr. Obama said like Europe, the U.S. has short-term and long-term problems. In the short term, he said, the U.S. must boost job growth, and he urged Congress to pass a series of economic proposals he offered last year to put teachers, first responders and construction workers back on the job. In the long term, the U.S. needs to work to bring down its deficit.

"And that recipe of short-term investments in growth and jobs with a long-term path of fiscal responsibility is the right approach to take for, I think, not only the United States, but also for Europe," Mr. Obama said.

Write to Jared A. Favole at jared.favole@dowjones.com

(Ian Talley contributed to this article.)