Geithner 'encouraged' by European reform pledges

6th December 2011, Comments 0 comments

US Treasury Secretary Timothy Geithner said Tuesday the world was watching European leaders as they grapple with the eurozone debt crisis but welcomed what he called encouraging signs.

Geithner said he was "very encouraged by developments in Europe in the past two weeks, including reform commitments in Italy, Spain and Greece and new progress towards a fiscal compact."

Speaking after talks with German Finance Minister Wolfgang Schaeuble in Berlin, Geithner told reporters the rest of the world was closely following the political decisions aimed at steering the eurozone back to stability.

But he acknowledged that the United States had its own daunting problems to solve.

"I just want to say that although the eyes of the world are very much on Europe now, as an American, I want to make it clear that we face very challenging economic challenges in the US still," he said.

"We have a lot of work ahead of us."

Geithner, who is on a European tour, said Washington hoped the EU's economy would emerge stronger from the crisis.

"I'm here in Europe of course to emphasise how important it is to the US and the world economy as a whole that Germany and France succeed, alongside other European countries ... in building a stronger Europe."

At a two-day EU summit beginning Thursday dubbed the last chance to save the euro, leaders will thrash out proposals laid down by France and Germany to change the bloc's framework.

German Chancellor Angela Merkel and French President Nicolas Sarkozy want changes to the EU treaty to make punishments automatic for countries that break debt laws.

They also called for monthly meetings of eurozone leaders as a form of euro government and individual members of the bloc to enshrine strict budgetary discipline in their laws while rejecting any form of pooling debt together.

Schaeuble for his part said there had been "huge progress" in the preparation for the summit.

"The objective is to set down a clear signal which will allow us to restore confidence to the markets," the minister said.

At an EU-US summit last week, President Barack Obama told top European officials they must act now, with decisive force, to fix the debt crisis which threatens to derail the fragile US recovery.

"This is of huge importance to our own economy," Obama said after hosting the head of the European Commission and the European Council at the White House.

"The United States stands ready to do our part to help them resolve this issue."

Geithner came to the meeting with Schaeuble fresh from talks in Germany's financial capital Frankfurt with the head of the European Central Bank Mario Draghi and the chief of the Bundesbank, Jens Weidmann.

Asked whether the ECB could play a more aggressive role in the crisis, by buying bigger amounts of government bonds -- a controversial topic in Europe -- Geithner insisted on the bank's independence.

"For reasons you can all understand, I'm not going to speak to what the ECB should do, or will do or can do," he stressed.

However, he noted that "ultimately, these things only get solved by governments and central banks doing what is necessary."

He also said the United States would "continue to support a constructive role" by the International Monetary Fund (IMF) in the crisis.

"Of course, the IMF exists in some ways for this purpose, to help members meet their financial needs provided they are willing to meet the IMF's conditions," he said.

Geithner's next stop is Paris where he will meet Sarkozy and Finance Minister Francois Baroin.

He will then travel to the southern French city of Marseille where Europe's conservative leaders are gathering before the summit and hold a bilateral meeting with Spain's Prime Minister-elect Mariano Rajoy.

His final stop was expected to be to Italy, in the eye of the eurozone storm, where he will hold talks with Prime Minister Mario Monti.

© 2011 AFP

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