U.S. Treasury Secretary Timothy F. Geithner will travel to Europe next week for meetings with political leaders and central bankers as they prepare for a summit on the continent’s worsening debt crisis.
Geithner will meet French President Nicolas Sarkozy, Italian Prime Minister Mario Monti and European Central Bank President Mario Draghi during his Dec. 6-8 trip, the Treasury Department said in a statement today. He will return to Washington before the Dec. 9 summit in Brussels.
The Treasury secretary will hold “discussions with his counterparts on their efforts to reinforce the institutions of the euro area,” the Treasury said.
Geithner has been pressing European leaders to take stronger action to stem the crisis, which has seen bailouts of Greece, Ireland and Portugal and now threatens to engulf Italy and Spain. Officials from the Treasury and the Federal Reserve have said Europe also poses a risk to the U.S. recovery.
“It’s Europe’s crisis,” Geithner said Nov. 15. “Fundamentally, the resolution of this is going to depend on the choices they make going forward. And we hope they make some progress more quickly.”
Geithner will meet Dec. 6 in Frankfurt with Draghi and Bundesbank President Jens Weidmann. Later that day, he will talk with German Finance Minister Wolfgang Schaeuble in Berlin.
The next day, he will meet in Paris with Sarkozy and French Finance Minister Francois Baroin before traveling to Marseille for discussions with Spain’s prime minister-elect, Mariano Rajoy, “who will be in France for other meetings,” the Treasury said. Geithner will meet with Monti on Dec. 8 in Milan.
“It seems useful for the secretary to continue to press European policymakers to take decisive action, though it’s not clear they are ready to listen to his advice,” said Phillip Swagel, who was an assistant secretary for economic policy in the George W. Bush administration.
A European proposal to channel central bank loans through the International Monetary Fund may deliver as much as 200 billion euros ($270 billion) to fight the debt crisis, two people familiar with the negotiations said.
At a Nov. 29 meeting attended by Draghi, euro-area finance ministers gave the go-ahead for work on the plan, said the people, who declined to be named because the talks are at an early stage. The need for a new crisis-containment tool emerged as the effort to boost the 440 billion-euro rescue fund to 1 trillion euros fell short.
Under the proposal, national central banks would recycle funds through the IMF, potentially to underwrite precautionary lending programs for Italy or Spain, the two countries judged to be the most vulnerable now, the people said.
The euro area’s 17 national central banks operate under the ECB’s umbrella. Draghi yesterday hinted at a stepped-up crisis- fighting role as long as governments move toward a “fiscal compact” that ensures healthy public finances.
German Chancellor Angela Merkel laid out elements of that strategy today, calling for European treaty amendments to create automatic, court-enforced sanctions on countries that overstep limits of 3 percent of gross domestic product on deficits and 60 percent of gross domestic product on debt.
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