Lael Brainard, the U.S. Treasury Department’s chief international official, said that “we need to give some more time” for Greece’s international financial rescue to work.
“Greece’s program has gone off track for some period of time in part because they had a protracted political process and did not have a government,” Brainard said at a news briefing today at the Group of 20 nations’ summit in Los Cabos, Mexico. “There is always in stabilization programs, financial, fiscal and structural reform programs, the ability to recognize that we need to give some more time, recognizing that economic outcomes didn’t come out quite the way was originally projected.”
Brainard, the Treasury Department’s undersecretary for international affairs, spoke as Greek leaders rushed to forge a new government that can negotiate changes to some of the austerity measures linked to the 240 billion euros ($302 billion) pledged by international lenders. Greece will run out of money in mid-July, the Syriza party, which placed second in weekend elections, said on June 13.
Greek election winner Antonis Samaras has begun government-formation talks, while German Chancellor Angela Merkel has offered little flexibility on emergency loans needed to keep the country in the euro and avert economic collapse.
Brainard is attending the G-20 summit along with Treasury Secretary Timothy F. Geithner and President Barack Obama. She said there is a “high degree of resolve” among leaders at the meetings to address market tensions and support job growth. Brainard said she doesn’t expect any decisions until a European Union summit in Brussels on June 28-29.
“There’s ample room for both sides to sit back down, recognizing the world has been somewhat more adverse and the Greek government has not been in a position to be moving forward in this period of time in which the government was unable to form and find a way forward that is still very much consistent with the reform commitments that were taken on,” Brainard said.
Group of 20 chiefs began their two-day meeting in Mexico today as Spanish borrowing costs soared to a euro-era record.
Brainard said leaders are focused on creating a path for a financial union that is a “necessary compliment to monetary union” within the euro area. She said officials are considering steps for bank supervision, resolution authority, recapitalization and deposit insurance.
“This is critical for confidence,” she said. “In this regard, you’ll see that they are noting their determination to take the necessary steps to break the feedback loop between banks and sovereigns.”
Brainard’s comments contrast with those of Merkel, who has rejected calls for a deposit-insurance fund. In a speech on June 15, Merkel said she opposes “premature” proposals for pooling debt to stem the euro area’s financial crisis.
“Germany will not be persuaded of all those quick solutions such as euro bonds, stability bonds, a European deposit-insurance fund,” Merkel said in a speech to a small-business group in Berlin.