U.S. Treasury Secretary Timothy F. Geithner said “there is no chance that the major countries of Europe will let their institutions be at risk in the eyes of the market.”
Geithner, speaking at a conference in New York today, said German Chancellor Angela Merkel has repeatedly said “we are not going to have a Lehman Brothers,” a reference to the collapse of Lehman Brothers Holdings Inc. in 2008, which deepened the financial crisis.
“I think she recognizes that they’ve got to do some more to make sure that they make that commitment credible to the world,” Geithner said at the Delivering Alpha conference produced by CNBC and Institutional Investor.
On Sept. 16, Geithner will attend a session of Europe’s Economic and Financial Affairs Council, known as Ecofin, in Wroclaw, Poland. At the meetings with European Union finance ministers, he will urge European governments to step up their crisis-fighting efforts.
Geithner said European leaders need to have “more force behind their commitments” to ensure that Italy and Spain can keep sustainable interest rates. He said Europe must undertake reforms for Greece, Ireland and Portugal, and have the capacity to stand behind the European financial system.
“They recognize that they are going to have to do more to earn the confidence of the world, that they have the political will to do this,” Geithner said.
Geithner’s trip to Wroclaw will be his second to Europe in a week. He returned to Washington on Sept. 10 from a gathering of Group of Seven finance ministers and central bankers in Marseille, France, where he urged European leaders to “act more forcefully.” The meeting in Poland includes officials from all 27 EU nations, a broader gathering than the G-7.
He said today the problems in Europe matter to the United States because they add to caution around the world.
“We have a big interest in helping them through this but this is their challenge and they have the economic and financial capacity to meet this challenge,” Geithner said. “People who are concerned that this is beyond their grasp are mistaken. The size of the challenges they face, financial, economically, are completely within the capacity of the stronger European members to manage”
Geithner said a failure by Congress to approve President Barack Obama’s $447 billion jobs program would weaken the economy.
“If we do not pass a package this large and this powerful, then economic growth in the United States will be weaker, no doubt about it,” he said.
Obama proposed a jobs plan that is weighted toward tax cuts, which account for more than half the dollar value of the plan. The rest would provide money for improving infrastructure, modernizing schools and helping states keep teachers and emergency workers on the job. The centerpiece is a cut in the payroll tax, which covers the first $106,800 in earnings and is evenly split between employers and employees. Obama would reduce the portion paid between workers next year to 3.1 percent from 4.2 percent now.
Geithner said changes in rules giving U.S. companies incentives to return overseas profits to the United States would be proposed as part of a broader overhaul of corporate-tax laws.
“You’ll see us propose ways to strengthen incentives to bring that money back, but we’re not going to do that -- repatriation outside of corporate tax reform -- for the simple reason it costs a lot of money,” Geithner said.
His comments at the conference were broadcast on CNBC television.
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