Geithner calls for action on EU crisis plan

LONDON (Reuters) - Treasury Secretary Timothy Geithner said that financial markets wanted to see how a $1 trillion EU/IMF plan to provide back-up financing for euro zone governments put into action.

Britain's Chancellor of the Exchequer, George Osborne (L), greets U.S. Treasury Secretary Timothy Geithner outside 11 Downing Street, in central London May 26, 2010. REUTERS/Stefan Wermuth

The fund aims to provide assistance to euro zone governments if they have difficulty raising debt from capital markets, and was launched at the start of the month due to worries Greece might default on its debt.

However, it has so far failed to stem a crisis of confidence about economies in the eurozone.

“It’s a good program (and) has got the right elements. What markets want to see is action,” Geithner said at a joint news conference in London on Wednesday with his British counterpart George Osborne.

European leaders had put through a strong fiscal program as part of a broader program to stabilize markets, Geithner added on the first stop during a trip to Europe.

Osborne said that he was happy that other European states agreed on the need for a bank levy to fund the cost of future bailouts, and reiterated Britain’s position that the funds raised should be treated as general taxation rather than saved until a crisis happens.

Washington has clearly been unhappy with Germany’s decision to go it alone in banning some types of speculative trading as it considers the measures counterproductive.

The U.S. Treasury Secretary was likely to have found backing for his position in London where the new Conservative/Liberal Democrat government has said greater cooperation in policy making is essential and officials have privately derided Berlin’s actions as mad.

But Washington will be also keen to stress that while the political rhetoric globally may have shifted to deficit control, it still sees a role for fiscal stimulus in its own case.

“We absolutely agree on the need to reduce the deficit over time, but for a country like the U.S., there is still space and need for targeted actions,” said White House economic adviser Christina Romer, who accompanied Geithner on his flight to London from China.


The U.S. treasury secretary will later travel to Frankfurt for a dinner meeting with European Central Bank President Jean-Claude Trichet.

He then goes to Berlin on Thursday where no doubt German Finance Minister Wolfgang Schaeuble will get a dressing down for his government’s unilateral restrictions on speculative trading.

Washington has been dismayed by how far the Greek crisis has spread to the rest of the euro zone and once again put the entire world banking system under threat due to what it thinks was a lack of decisive and early action.

It was the U.S. Treasury that initiated this month’s G7 emergency conference calls that led to the massive rescue fund for the euro zone but there is rising concern that this may not have been enough and markets are still falling sharply.