Europe’s bailout plan for Greece is an “important step” and the continent’s challenges include boosting economic growth, the U.S. Treasury Department’s top international official said.
“There are a number of additional steps that are going to be necessary to put Greece firmly on a sustainable path as part of a kind of an overall framework to put Europe on a much stronger footing,” Lael Brainard, Treasury undersecretary for international affairs, said in an interview today on the “Charlie Rose” show broadcast on PBS and Bloomberg Television.
European finance ministers approved a 130 billion-euro ($172 billion) package for Greece early today by tapping into European Central Bank profits and convincing investors to provide more debt relief to the Mediterranean country. The deal includes a 53.5 percent writedown for investors in the nation’s debt.
Europe’s leaders are “grappling with the challenges of supporting growth at a time when several of the countries are also trying to get their fiscal deficits down to more sustainable levels,” Brainard said.
The Greece plan seeks to reduce that nation’s debt burden by 107 billion euros, about half the country’s estimated gross domestic product for 2011, according to the Institute of International Finance.
In return for the new cash, Greece signed up to cuts in pensions, the minimum wage, health-care and defense spending, as well as layoffs of state employees and asset sales. The country must implement that austerity with unemployment already topping 20 percent.
Financial markets signaled doubt the accord will fix Greece’s travails permanently or spell an end to the two-year debt crisis. The euro surrendered initial gains against the dollar and European stocks fell from a six-month high.
Euro members have spent at least 386 billion euros averting defaults for Greece, Ireland and Portugal, none of which are currently able to sell bonds on the international capital markets.
“Ultimately it’s Europe’s responsibility to chart a path forward that will fundamentally restore market confidence and show the world that euro area is going to be sustainable and viable into the future,” Brainard said.
“We have stayed very engaged” on Europe, she said. “We do a lot of back-channel diplomacy with the key decision-makers at the table.”
Europe’s debt crisis will be the focus when Group of 20 finance chiefs, including U.S. Treasury Secretary Timothy F. Geithner, meet this weekend in Mexico City.
On China, Brainard said the world’s second-largest economy “has made a lot of progress on the currency issue.”
The Obama administration says China uses an undervalued currency to give its exporters an unfair advantage in overseas markets.
President Barack Obama told Chinese Vice President Xi Jinping last week that China’s growing influence brings with it responsibility to work toward “balanced” trade and to recognize the aspirations of all people for greater rights.
Obama met in Washington with Xi, who is in line to become China’s top leader next year. The U.S. also is prodding China toward greater cooperation on confronting the regime in Syria as well as thwarting Iran’s pursuit of a nuclear weapon.