U.S. Treasury Secretary Timothy F. Geithner said European leaders must go beyond a planned recapitalization of banks to resolve the continent’s sovereign-debt crisis.
“The most important problem is they have to make sure that the major economies of Europe that are under pressure now are able to borrow at affordable rates,” Geithner said in an interview with Bloomberg Television. “They recognize the need to do more than they’ve done so far.”
Geithner will be in Paris on Oct. 13-14 for a meeting of Group of 20 finance ministers. European officials are striving to meet an end-of-month target set by French President Nicolas Sarkozy to get to grips with the crisis, which has propelled Greece to the brink of default, shaken world markets and fueled speculation that the 17-nation currency might not survive in its current form. European leaders are due to meet on Oct. 23.
“They are moving but they have some ways to go,” Geithner said. “You saw the president of France, the president of Germany make some very promising, very encouraging statements,” he said. “The Europeans recognize they need to put in place a much more substantial, much more powerful response if they are going to achieve their objectives, which is helping countries reform by making sure they have enough oxygen that they can get through this.”
Blueprint for Banks
France’s Sarkozy and German Chancellor Angela Merkel have promised a recapitalization blueprint later this month that will overtake a 12-week-old rescue plan that has yet to be put into place.
“We will recapitalize the banks,” Sarkozy said in Berlin on Oct. 9 at a joint briefing with Merkel, without providing details. “We’ll do it in complete agreement with our German friends because the economy needs it, to assure growth and financing.”
European Union and International Monetary Fund officials indicated Greece will get an 8 billion-euro ($11 billion) loan next month under a 110 billion-euro bailout, as European leaders move to reopen talks on a new package that may mean deeper writedowns on Greek debt.
Greece’s debt load will climb to 173 percent of gross domestic product in 2012 as the economy contracts for a fifth year. Greek bank stocks slumped for a second day today amid talk of a deeper writedown of their holdings of government bonds. National Bank of Greece SA, the largest, lost almost 16 percent to 1.60 euros at 5:19 p.m. in Athens.
‘Damaging’ U.S. Economy
Geithner said today that the European debt crisis is “bigger than” recapitalization. He said the crisis is also damaging the U.S. economy, and the U.S. must “do everything we can to make it more likely that they move as aggressive as they need to.”
Geithner also criticized Republicans for failing to support President Barack Obama’s $447 billion jobs plan.
“If Congress does not act it will be because Republicans decided they did not want to do anything to help the economy,” Geithner said. “If Congress does not act, then growth will be weaker, more people will be out of work, we’ll be putting off the important challenge we have as a country going forward, and that’s not something we should do.”
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