The flawless election victory of Barack Obama is acknowledged by one and all but now comes the greatest of challenges which an American president has ever faced: the financial crisis which is escalating to a recession and spreading to financial centres around the world.

Obama's victory could be largely attributed to his flowing rhetoric that captured the hearts and minds of the world. It was of a variety delivered from pulpits with resonant undertones of basic American values such as democracy, freedom, greatness of the American nation and American values.

He touched upon the problems faced by the nation but did not offer definitive solutions though he had some proposals to make. But his flowing rhetoric cannot solve the complex challenges before him, particularly the financial crisis.

To an outside observer of the American scene a striking feature is that no economic or political pundit sounded warnings before the crisis engulfed the nation. Once it happened many were the remedial measures suggested but a sure cure - if there is one - has yet to be made. But it is essential and has to be found soon.

However, financial crises may take years to resolve such as the great depression in the 1930s that lasted for a greater part of the decade. The Obama magic which has worked in America and in the rest of the world will not last long if industries and financial institutions keep collapsing and thousands are unemployed.

Foreign policy

In foreign affairs he walks in to two ongoing wars in Iraq and Afghanistan. There is also the volatile Middle East, the fallout of which will impact on the domestic scene. Senator Barack Obama is known as one of the most liberal senators. But as the president he would have to be much more pragmatic and tread a middle of the road path.

His policies will be viewed with much suspicion by the extreme conservative right not only because of his liberal views but because he is black and his middle name is Hussein. At times he will have to stray beyond his path to satisfy powerful interests like he did when he addressed the Jewish American lobby soon after receiving nomination from the Democratic Party.

He pledged to support the proposal of making Jerusalem the capital of Israel - a pledge which even George W. Bush had not made. This pledge has not pleased Islamic lobbyists who are bound to take up cudgels against him as he continues with his pro-Israel policies which he must, if he is to keep a vast proportion of his constituents happy.

His choice of Rahm Emmanuel, an American Jew, as the chief of staff of the White House has already upset some of the Islamic lobbyists even in Sri Lanka and his pledge to wage war against the al Qaeda and the Taliban and to go after Osama bin Laden and ' kill him' would certainly not please closet bin Laden's fans.

Iraq

Obama has spoken of his intention of pulling out American troops from Iraq in 16 months time but the question is whether al Qaeda and Iran will step up violence in Iraq making a pullout of US troops as intended not possible.

Where al Qaeda is concerned they would most probably want to wear down the 'Great Satan' in terms of its troops and money. Iran too would want to make matters difficult for America now that Obama had declared that possession of nuclear weapons by Iran was 'unacceptable.' Last week's killing of two American soldiers by Iraqi troops while on a joint patrol would be a matter of great concern if such a situation develops further.

Having opposed American intervention in Iraq at its very inception Obama has said that the focus should be on Afghanistan and that he would move some troops from Iraq to Afghanistan to fight the Taliban and go after al Qaeda. The war in Afghanistan is going badly for the American and NATO troops with the Taliban now making their presence felt in the main cities such as Kabul and Kandahar.

It is apparent that more troops are needed there. Besides NATO countries appear to be dragging their feet in Afghanistan. Their governments appear to be unwilling to send troops to Afghanistan where they have little or no interest. It could well be that Obama may have to take on the entire operation in Afghanistan.

Pakistan

An even greater problem is Pakistan where al Qaeda and presumably bin Laden himself have taken refuge. Obama's stand on this issue has been that if Pakistani authorities do not take on the al Qaeda and Taliban operatives who have taken refuge in the Pakistan-Afghan border regions US troops would go into Pakistan. Already US is conducting air attacks on Pakistani territory with unmanned aircraft and many civilians have been victims of such attacks.

This is indeed a very queer development because Pakistan has been the most important ally of the US since the early days of the Cold War. Obama will obviously try to sort it out with the new civilian government of Asif Zaradari and of the 15 world leaders he had telephoned after his election, Zaradari has been one.

India

Better relations with Pakistan invariably results in head-on collisions with Pakistan's arch foe, India. Obama's failure to include the Indian Leader Manmohan Singh in the list of world leaders he had called after his election had resulted in much heartburn in New Delhi as widely reported in the Indian media. It was viewed with even much concern because President George W. Bush had actively promoted closer Indo-American relations as never before, even abandoning the US policy of nuclear non proliferation.

The Indo-US civilian nuclear deal was the high watermark in this relationship. Obama, however a few days later telephoned the Indian premier stressing that he considered Indo-US relationships a 'very important partnership' and that his administration would want to work with India on all important global issues.

China

Obama's China policy has not been very clearly spelled out but it does appear that he will need the cooperation of China to get out of the financial mess. China has trillions of dollars invested in the US and any signs of a pull out could spell disaster to the US. Last week China pumped in $586 billion into its own economy to 'stimulate its domestic economy and neutralise the global slowdown.'