Geithner Says Europe Committed to Resolving Crisis
U.S. Treasury Secretary Timothy F. Geithner said Europe is “absolutely committed to doing what’s necessary” to resolve the continent’s debt crisis, one day after meeting with German Finance Minister Wolfgang Schaeuble and European Central Bank President Mario Draghi.
“This is completely within their financial ability to solve,” Geithner said today at an event at the Los Angeles World Affairs Council. He added that “the politics of doing this are very hard.”
German government bonds rose for a second day, and Spanish bonds slid for the first time in five days as German Chancellor Angela Merkel’s coalition rejected granting the permanent rescue fund access to European Central Bank liquidity, fueling doubts that Draghi will fulfill his pledge to “do whatever it takes to preserve the euro.”
“Both the economic reforms and those changes to the institutions of Europe are going to take a long time and going to take time to work,” Geithner said today. “What Europe’s trying to do now is make sure they do enough to hold things together, lay the foundation for growth in the short term, bring down interest rates.”
Geithner held separate meetings yesterday in Germany with Schaeuble and Draghi. In a statement released after their meeting, Geithner and Schaeuble “took note” of comments made last week by European leaders to “take whatever steps are necessary to safeguard financial stability” in the 17-nation euro area.
The jobless rate in the euro area reached the highest on records dating to 1995 as the debt crisis and deepening economic slump prompted companies to cut jobs. Unemployment in the economy of the 17 nations using the euro reached a revised 11.2 percent in May and held at that level in June, the European Union’s statistics office in Luxembourg said today.
Germany’s 10-year bund yield declined nine basis points, or 0.09 percentage point, to 1.28 percent at 4:52 p.m. London time after rising to 1.43 percent yesterday, the highest since July 5.
The rules of the European Stability Mechanism don’t provide for refinancing through the ECB, the German Finance Ministry said today in an e-mailed response to questions. The ministry isn’t holding talks on the topic nor are secret meetings taking place on such proposals, it said.
France and Italy are building support for a previously floated plan to allow the permanent backstop to wield unlimited firepower courtesy of the ECB, Germany’s Sueddeutsche Zeitung newspaper reported today, citing a European Union official it didn’t name. Leading ECB governing council members are among those who now back the idea, the newspaper said.
Almost three years into Europe’s financial crisis, leaders are still struggling to hit upon a solution.
France and Italy are “determined” to do everything to protect the “integrity” of the euro zone, President Francois Hollande and Prime Minister Mario Monti said today in a joint statement released after a working lunch in Paris.
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