–Need Major Players In Eurozone To State Their Intentions, Add Clarity
By Brai Odion-Esene
WASHINGTON (MNI) – The eurozone sovereign debt crisis continues to
pose difficulties for its authorities but what should not be in doubt
is the determination of Europe’s leaders to keep monetary union
together, U.S. Treasury Secretary Tim Geithner said Wednesday.
“This is a very challenging crisis for them still, they recognize
they are going to have to do a bunch more to restore calm,” Geithner
said during a conversation on the global economy at the Council on
Foreign Relations.
Speculation continues to mount that struggling euro area member
Greece could exit the union following elections on June 16 and 17, but
Geithner said his view is that “they (eurozone leaders) considered this
very carefully, and they’ve decided it is in their interest to hold it
together.”
“What they say to us privately is that they will do whatever is
necessary to hold it together,” he reiterated.
Geithner underlined the sense of urgency felt by eurozone leaders,
noting that, “They are not minimizing the risks, and they are not
telling us that they feel they have a whole bunch of time.”
One step that could be taken to boost confidence, Geithner said, is
“to have the major players in Europe state what their intentions are
even if it’s going to take a little time to negotiate the details. That
in itself would be reassuring,” he said.
Geithner predicted that heading into the G-20, and the Europe
leaders summit at the end of the month, the world will be looking to
Germany and the other major euro area nations to lay out with more
clarity “what these broad objectives mean on banking union, on a
firewall for the reform of countries and on growth.”
It is still a very challenging moment for the global economy,
Geithner said, adding, “you’ve seen growth slow a bit in most of the
other major economies.”
As for the U.S. economy, Geithner said most forecasts are a 2%
growth rate over the next 18 months or so.
“That’s recognizing the pressures we see ahead from Europe and
elsewhere,” he said. “That growth is not strong enough to make a lot
more progress.”
This is why it is so important that U.S. policymakers put in place
more measures to strengthen economic activity, Geithner said.
Still, the Treasury secretary said the economy has gone from
“falling off a cliff” to growth, even if it is at a
slower-than-preferred pace.
He said Europe is in the next stage of another “major escalation”
in their strategy to make the monetary union work and contain the
crisis.
“What Spain did over the weekend — commit to a much more dramatic
recapitalization of its banking system — is a good, concrete signal,
and an illustration of their committment to move towards a broader
banking union,” Geithner said.
In addition, it is very important to have a credible financial
backstop in place for those euro area countries that are implementing
reforms, “because those reforms are going to take time and they will not
work without the ability of these countries to borrow at affordable
rates,” he said.
Leaders of the Group of 20 nations will meet in Los Cabos, Mexico
June 18-19, and Geithner said the world will want to hear from Europe’s
leaders “where they plan to go next.”
Geithner stressed the importance of European authorities acting
sooner rather than later, warning that: “If you wait to move … and you
let the market get ahead of you, then you increase the costs of the
solution and you make it harder to get there.”
Europe is a large part of the world economy, he said, and its
challenges are hurting growth both in the U.S. and around the globe.
“So we’ve a big stake in helping them deal with this more
effectively,” Geithner said. “We need a strong Europe … . We do not
benefit from a long period of European weakness.”
** MNI Washington Bureau 202-371-2121 **
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