U.S. Treasury Urges European Crisis Action as G-7 Set to Meet

A U.S. Treasury Department official urged European leaders to take decisive action to prevent a spread of the region’s sovereign debt crisis, two days before a meeting of Group of Seven nations finance ministers in France.

The Treasury official, in a telephone conference call with reporters today, urged the construction of a stronger firewall in Europe without being more specific. The person spoke on condition of not being further identified because of a lack of authorization to comment publicly on the G-7 meeting.

Treasury Secretary Timothy F. Geithner will travel to Marseille, France, tomorrow for the G-7 meetings on Sept. 9-10 on growth, jobs and financial stability. Officials will also discuss transition efforts in economies in the Middle East and North Africa, with a Libyan representative expected to attend.

The Treasury official said the U.S. supports efforts by Europeans to confront the turbulence caused by the banking and sovereign-debt concerns. The person also said China has the capacity to let its exchange rate adjust more rapidly.

The European debt crisis is holding back the U.S. recovery, said Eswar Prasad, a senior fellow at the Brookings Institution in Washington and a professor at Cornell University in Ithaca, New York.

“Unless the debt crisis is resolved soon and is accompanied by significant structural and fiscal reforms, Europe faces poor growth prospects,” he said in an e-mail today. “This is no comforting thought for the U.S. as Europe still remains one of its major export markets.”

To contact the reporters on this story: Cheyenne Hopkins at chopkins@bloomberg.net; Ian Katz in Washington at ikatz2@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net