Geithner urges unity as EU nations forge ahead on reform
US Treasury Secretary Timothy Geithner is urging Europe to work on a coordinated approach to reform on a two-day trip to the continent even as EU members moved ahead with stopgap measures designed to tackle the financial crisis.
US Treasury Secretary Timothy Geithner urged Europe to work for a coordinated global approach to financial reform on Wednesday even as the European Union moved ahead with independent measures designed to turn its economic crisis around.
Geithner said he wanted to "emphasise the importance of a carefully designed global approach" toward financial reform on his flight to Europe from China on Tuesday. His trip comes amid concerns that the European debt crisis threatens a fledgling global economic recovery.
But Geithner’s calls for global unity have so far gained little traction in Europe, with the EU announcing on Wednesday that it might independently implement a levy on banks to help prevent future crises and avoid relying on taxpayer funds to bail out crisis-hit institutions in the future.
Michel Barnier, the EU commissioner tasked with reforming financial services, said the new EU-wide rules would be in place by 2011 to tax bank assets, liabilities and profits.
“On this question, we can go forward by ourselves, on our own,” he said, adding: “It is not up to the United States to pay for the financial stability of Europe.”
Germany, for its part, has announced unilateral plans to ban the naked short-selling of shares in major financial firms and sovereign euro bonds in credit default swaps -- a decision that a senior US Treasury official described as “counterproductive”. Despite criticism from several quarters, Berlin on Tuesday proposed extending the restrictions to apply to all shares.
Markets want governments to ‘come together’
At a joint news conference in London with British Finance Minister George Osborne on Wednesday, Geithner said that united action across governments would help restore confidence in the world’s jittery financial markets. “Obviously markets want to see action, they want to see governments come together and act and follow through on that,” he said.
He said investors were also waiting for more detail on how a $1 trillion joint European Union-International Monetary Fund plan to offer backup financing for eurozone economies would operate. The fund was announced earlier this month amid concern Greece might default on its public debt.
“It's a good programme [and] has got the right elements,” Geithner said of the proposal, adding that Europe has exhibited a “strong political commitment” to resolving the continent’s financial woes.
Geithner also plans to urge EU nations to stress-test their banks to identify those that need injections of capital, a move it is hoped would help restore confidence in the banking system.
European leaders face “the difficult challenge of trying to restore sustainability to an unsustainable system”, Geithner said on Tuesday.
But it is not all bad news for the eurozone. The Paris-based Organisation for Economic Co-operation and Development (OECD) was relatively optimistic about the region’s prospects, forecasting growth of 1.2 percent in 2010 and 1.8 percent next year, more promising figures than the European Commission's own estimates of only 0.9 percent eurozone growth this year and 1.5 percent in 2011.
Geithner is due to meet German Finance Minister Wolfgang Schaeuble in Berlin on Thursday following a dinner in Frankfurt with European Central Bank President Jean-Claude Trichet.