us prods eurozone leaders after central banks act
Last Updated : GMT 18:07:55
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US prods eurozone leaders after central banks act

Arab Today, arab today

Arab Today, arab today US prods eurozone leaders after central banks act

Washington - AFP

US Treasury Secretary Timothy Geithner will hold rare talks with European finance ministers Friday, after the world's main central banks joined forces in a bid to douse the Greece debt fire. As Europe seeks to end months of bickering over a second bailout for the near-bankrupt government in Athens, Geithner will address them in Wroclaw, Poland from 1330 GMT. The rare invitation to an outsider follows repeated calls by US President Barack Obama for eurozone leaders to settle their differences before financial chaos speads further from Europe's shores. Ministers from the 17 currency partners at the heart of a crisis, threatening to tip major economies back into recession, start their internal sparring from 0630 GMT, with pressure rising on governments whose taxpayers are tired of funding repeated bailouts. In Washington, IMF managing director Christine Lagarde called for bolder action on both sides of the Atlantic, warning that indecision and "political dysfunction" was pushing the US and Europe back towards the brink. The developed economies have entered a "dangerous new phase" worsened by feeble political leadership, with deepening uncertainty over the fate of the most heavily indebted economies, Europe's banks, and US households, she said. "If the advanced economies succumb to recession, the emerging markets will not escape. Nobody will," Lagarde warned. After Brazil, Russia, India, China and South Africa signalled they would intervene to prop up European government debt, the eurozone, US, Japanese, Swiss and British central banks leapt into action on Thursday. They announced they will inject untold reserves of dollars into commercial banks threatened by their exposure to the eurozone's debt mountain, providing a lift to bruised banking stocks and the euro currency. In Wroclaw, ECB president Jean-Claude Trichet said such coordinated moves represent "a pillar of stability and confidence," just as the European Union executive warned its economy was set to come to a "virtual standstill" in the second half of the year. The European Commission now tips a mere 0.1 percent growth for the final three months of the year, worse than previously thought, with EU economic affairs commissioner Olli Rehn warning that "financial market turmoil is set to dampen the real economy. With markets convinced that Athens is headed towards default, and some suggesting an eventual pull out from the euro, French President Nicolas Sarkozy and German Chancellor Angela Merkel insisted Wednesday that Greece belongs in the eurozone. In a three-way call with the French and German leaders, Greek Prime Minister George Papandreou promised to apply overdue reforms demanded in return for eight billion euros of agreed loans currently on ice. Rehn said he expected auditors from the EU, ECB and International Monetary Fund to complete their review of Greece's budget measures by the end of September, and that "progress" had been made on one of the main hold-ups at the eurozone's end. Finland, mindful of its gold-plated reputation on credit markets, wanted Greece to lodge cash collateral before handing over any money, a demand that has accentuated deep divisions across the currency bloc. Slovakia's refusal to stage an early parliamentary vote on ratification of the second, 160-billion-euro bailout agreed in principle back in July is another thorny subject still to be resolved. A senior EU official told AFP in Wroclaw that Slovakia, which sat out the first Greek bailout in May 2010, could again be allowed to keep its money provided it brings forward legal acceptance of plans to revamp the powers granted to a broader eurozone rescue fund. "I trust this will be concluded by end September-early October at the latest," Rehn said of full, 17-nation ratification. Belgian Finance Minister Didier Reynders, who heads a longstanding caretaker government, said now was not the time "to rebuild walls," but to use the crisis to give new foundations to political integration in Europe. Nevertheless, deep divisions remain on the idea of issuing unified eurozone bonds to level out interest rates. The European Commission will soon present options for such "eurobonds," but Merkel sees a scheme that would see all eurozone governments share in guaranteeing each others' borrowings as an "absurdity."

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