Europeans Struggle to Clear Hurdles to Latest Euro Rescue Plan

They also found themselves at odds with the U.S. Treasury secretary, Timothy F. Geithner, who, after his highly unusual attendance at a meeting of top European officials, warned them that a lack of decisive action could leave “the fate of Europe” to outsiders.

The first of two days of talks in Poland left the European finance ministers no closer to overcoming crucial hurdles holding up their bailout plan for Greece. And it highlighted trans-Atlantic differences over the best ways to revive growth in developed economies and restore stability to the financial markets.

Mr. Geithner suggested increasing the firepower of the euro zone’s bailout fund to help protect banks potentially vulnerable to a default by Greece and other deeply indebted countries, but did not appear to convince European ministers. Conversely, Mr. Geithner opposed a European proposal for a financial transaction tax, the officials said.

Meanwhile Jean-Claude Juncker, president of the group of euro area finance ministers, ruled out any possibility that Europeans might change course and stimulate economic growth, citing this as a significant difference with the Obama administration.

The talks came at a time of continued anxiety in the financial markets, and before a deadline for Greece’s foreign creditors to decide whether to release the next installment of its original bailout.

If Greece does not get its next €8 billion, or $11 billion, in funds scheduled to be released in October, it could have to default on its debts, with potentially devastating consequences for Europe and the global economy.

The fact that Mr. Geithner made the trans-Atlantic journey — just one week after attending the meeting of finance ministers from the Group of 7 countries in Marseille — was seen as a signal of the seriousness with which the United States viewed the European situation.

Meeting in the morning with finance ministers representing the 17 nations in the euro zone, Mr. Geithner suggested that they give the euro zone’s planned €440 billion bailout fund added heft by allowing it to act more like a bank and borrow more freely on the financial markets.

A similar model was used by the United States after the collapse of Lehman Brothers at the height of the 2008 financial crisis. That program, known as TALF, began while Mr. Geithner was still president of the Federal Reserve Bank of New York. Under it, the U.S. Treasury made $20 billion available in seed money that the New York Fed expanded into $200 billion to help revive lending in the consumer and small-business markets by purchasing securities backed by auto loans, business loans and credit card receivables.

“He raised it among other issues but did not press it,” Mr. Juncker said, who added, pointedly, that the euro group was not discussing “an increase or expansion” of its bailout fund “with a nonmember of the euro area.”

The Irish finance minister, Michael Noonan, said Mr. Geithner had been “very succinct” in raising the question. “It’s something he suggested that should be examined by Europe,” he said.

Mr. Geithner spoke first with ministers from euro zone countries and then addressed those from all 27 nations of the European Union. Officials at the U.S. Treasury Department said they would not comment on the details of private discussions. But at a separate business conference in Wroclaw, Mr. Geithner appealed to Europeans to solve the crisis themselves.

“One of the starkest ways to emphasize the importance of Europe getting on top of this,” Mr. Geithner said, according to a transcript of his remarks, “is that you don’t want the fate of Europe to rest in the hands of those who provide financing” to the International Monetary Fund “or who provide financing outside of the I.M.F.”

Maria Fekter, the finance minister of Austria, criticized Mr. Geithner for calling on Europeans to spend more to resolve the crisis while rejecting the idea of a small financial transaction tax to raise revenue from traders in the stock market.

“He conveyed dramatically that we need to commit money to avoid bringing the system into difficulty,” Ms. Fekter said. But when European officials, including the German finance minister, Wolfgang Schäuble, countered by suggesting the United States join Europe in adopting a transaction tax as a way to also promote more market stability, Mr. Geithner “ruled that out,” she said.

There was also a clear gap over who is primarily to blame for the current economic troubles plaguing both the United States and Europe.

Article source: http://www.nytimes.com/2011/09/17/business/global/europeans-struggle-to-clear-hurdles-to-latest-euro-rescue-plan.html?partner=rss&emc=rss