Geithner steps up pressure on Europe to resolve debt crisis

Dec 6, 2011, 21:55 GMT

Berlin - US Treasury Secretary Timothy Geithner stepped up the pressure on Europe Tuesday to reach an agreement this week on resolving the region's long-running debt crisis.

'I'm here ... to emphasize how important it is to the United States and to the world economy as a whole that Germany and France succeed alongside the other nations of Europe in building a stronger Europe,' Geithner said in Berlin, after talks with German Finance Minister Wolfgang Schaeuble.

Geithner was speaking on the first day of a three-day trip to Europe aimed at pressing Europe to solve the crisis, amid White House concerns about a possible financial meltdown in the eurozone and the threat it would pose to President Barack Obama's re-election.

The treasury secretary also raised the prospects of an increased role for the International Monetary Fund in combating the debt crisis gripping the eurozone, saying that Washington would support the IMF's 'constructive' involvement.

Geithner's visit to Europe comes as part of the buildup to a key summit of European leaders on Thursday and Friday this week, which is expected to sign off on a plan for strengthening budget discipline in the 17-member eurozone. This is likely to involve changes to European treaties.

But underlying the pressure facing European leaders, the US-based rating agency Standard & Poor's threatened to downgrade the credit rating of 15 of the eurozone's 17 states and the currency bloc's bailout fund.

The threat from S&P struck at the heart of the eurozone, with the rating agency saying it was reviewing the AAA ratings held by six currency bloc states, including Germany and France.

During his trip to Germany, the treasury secretary also met European Central Bank President Mario Draghi as well as Jens Weidmann, who heads up the German central bank, the Bundesbank.

Geithner is also due to hold talks in Paris Wednesday with French President Nicolas Sarkozy, and with Italian Prime Minister Mario Monti on Thursday in Italy.

In his comments, Schaeuble underlined the importance of this week's summit of the 27 EU leaders.

'All parties are aware of the great responsibility and the great importance of the meeting,' Schaeuble said.

Geithner told reporters that he was 'very encouraged' by the recent moves to contain the debt crisis, including the efforts by Spain, Italy and Greece to launch new austerity measures aimed at cleaning up their state finances. He said he welcomed 'progress toward a fiscal compact for the eurozone.'

The so-called fiscal compact is likely to be at the heart of what EU leaders decide this week.

It would involve a tradeoff between eurozone governments, agreeing to binding debt-and-deficit commitments in exchange for the ECB taking a more active role in the efforts to end the crisis.

This, Geithner said, will involve 'a very substantial commitment and a sustained commitment of political will.'

But Geithner would not be drawn on how the ECB might help in the fight to end the crisis, apart from saying that the Frankfurt-based central bank had been playing a 'central role' in the crisis.

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