US treasury boss meets EU ministers in bid to boost recovery

Deutsche Welle

US Treasury Secretary Timothy Geithner joined European finance ministers on Friday to discuss how the eurozone's common currency can continue to withstand the year-long debt crisis and how the bloc's bailout fund could be made more effective.

At the meeting in Wroclaw, Poland, Geithner was expected to recommend that the 440-billion-euro ($600 billion) fund be used in a similar way to an emergency fund set up by the US Treasury and the Federal Reserve in 2008, to bring stagnant credit markets back to life.

The US emergency fund, known as the Term Asset-Backed Securities Loan Facility (TALF), was introduced in an effort to reinvigorate the stalled US securities market.

The European Central Bank joined others in announcing short-term loans for banks 

Ahead of his visit, Geithner told the US broadcaster CNBC that he believed European leaders were committed to dealing with the crisis and that they had the economic capability to do so. His appearance at the meeting of European ministers comes after US President Barack Obama warned earlier this week that Europe needed to do more to solve its problems. "We will continue to see weaknesses in the world economy, I think, so long as this issue is not resolved," said Obama.

Brussels urged to solve own problems

While Obama said Washington was "deeply engaged" with the EU countries in solving the crisis, he added that only Europe could solve its own problems. In a decision announced Thursday, the European Central Bank along with its US, Japanese, Swiss and British counterparts, announced it would make short-term loans of US dollars available to banks. 

 

Lagarde said that developed economies had entered a "dangerous phase"

The news dramatically boosted European bank shares and the euro. International Monetary Fund chief Christine Lagarde said the joint move was "exactly what is needed." However, she also warned that past indecision meant that the world's developed economies had entered a "dangerous new phase."

The European Central Bank (ECB) has asked that the European Financial Stability Fund be established as quickly as possible to take on the task of bailing out ailing economies. 

That will require numerous countries to agree to the measures, though resistance against more aid has been growing. While there is opposition in Germany, there are also significant concerns in Austria, Finland, the Netherlands and Slovakia. Earlier in the week, German Chancellor Angela Merkel tried to ease market fears over Greece, stressing that an "uncontrolled" insolvency would be avoided and the eurozone would remain intact.

Author: Richard Connor (AFP, AP, Reuters)
Editor: Martin Kuebler