WILMINGTON, N.C., Oct 25 (Reuters) - Top U.S. Treasury Department officials on Tuesday urged European leaders to come up with a definitive plan for dealing with their debt crisis because it is a threat to global growth.
“We want to see, like the world wants to see ... the details, not just the objectives,” Treasury Secretary Timothy Geithner said after touring a North Carolina fiber optics manufacturing plant.
“I think they are saying all the right things, they’re moving with a greater sense of urgency, that’s all welcome,” Geithner said, adding: “But until we see what they come together with, it’s hard to evaluate.”
European leaders are to meet on Wednesday with the aim of agreeing to a plan to reduce Greece’s debt burden, fortify European banks to withstand bond losses, and scale up the euro zone rescue fund to prevent market contagion.
But as of late Tuesday, negotiations still were under way over how to reduce Greece’s debt to private sector bondholders and on the size of a planned bank recapitalization and the best way to leverage a rescue fund.
Earlier, Treasury’s assistant secretary for international affairs, Charles Collyns, testified before Congress that European leaders will need to move swiftly to implement whatever measures they settle on.
“This agreement will need to be implemented quickly and firmly,” Collyns said, adding that uncertainty stemming from the unresolved crisis was hurting business and consumer confidence and jeopardizing credit availability.
Geithner toured a Corning Inc. plant before meeting the press, on a one-day trip that aimed to build support for passage of all or parts of a job-creating package that stalled in the Senate. He said it would create construction jobs updating roads, rail, bridges and other infrastructure.
Appearing before the U.S. House of Representatives’ Financial Services subcommittee, Collyns said the U.S. financial system’s direct exposure to European countries under most stress was moderate.
But he said there was cause for concern because of extensive trade and investment ties with Europe.
“While direct exposure to the eurozone periphery is very limited, U.S.. banks’ exposures to the core European banks are much larger and these banks are the primary international lenders to peripheral European borrowers,” Collyns noted.
In response to questions, Geithner played down the idea that flat rate income tax could be fairer to Americans and be an economic stimulant. Republican presidential hopeful Rick Perry has proposed a 20 percent flat tax but also said people could have a choice: pay 20 percent tax or keep their current rate.
“At their core, these plans have the feature of shifting the burden substantially from upper income Americans to the less fortunate, to the middle class,” Geithner said.