U.S. Treasury Secretary Timothy Geithner’s effort to push European officials into resolving their debt crisis has already elicited some criticism.
Austrian finance minister Maria Fekter said Geithner should not be lecturing the Eurozone on its problems, while also refusing to consider the Europeans’ own strategic proposals.
Geithner is currently in Warsaw, Poland, to meet with Eurozone finance ministers to find a way out of the continent’s huge debt problems after more than two years of bailouts, wrecked economies and bickering. His presence in Europe suggests how increasingly concerned Washington has become over the global impact of the Eurozone’s financial issues.
Fekter told European media that Geithner urged leaders in very dramatic terms to tackle its debt crisis to prevent the destabilization of the global financial system. However, she claimed, he ruled out a proposal to impose a tax on financial transactions, which some European countries believe would be an equitable way to share the cost of bailouts.
Meanwhile, a decision to hand out the next $11 billion tranche in bailout money for Greece (the vortex of the debt malaise) will be delayed until October, according to Jean-Claude Juncker, the prime minister of Luxembourg and the head of the Eurozone finance ministers' group.
The Greek government complained that if it does not receive the funding, the country may run out of money, forcing Athens to stop paying public employees and default on its debts.
Juncker responded that while eurozone officials welcomed the renewed, firm commitment of Greece of adhering to its tough austerity program, the finance ministers would decide in October on the next tranche.
Fekter, however, said she is very optimistic that the next tranche can be paid out to Greece but warned that a default by Athens would be costly.
Should a situation arise, where this way [of providing rescue loans] suddenly becomes more expensive than the alternative, we will have to think about the alternative, she said. But at the moment this is not yet the case.
Other disagreements also prevail – finance ministers ruled out more fiscal stimulus to kick-start European economies, arguing that increased spending would be foolish amidst a backdrop of high debts.
Meanwhile, European markets have been convulsing with growing fears that Greece will indeed default. Credit ratings agency Moody’s recently downgraded two large French banks with significant exposure to Greece.
Five central banks around the world just agreed to raise liquidity by providing more funds to commercial lenders in Europe.
IMF boss Christine Lagarde added to the chorus or doom, by warning that the global economy faces great economic anxiety as possible solutions dwindle as the clock ticks.
We have entered into a dangerous phase of the crisis, she said. Collective, bold, decisive, courageous action is needed. [A solution] will require strong political will across the world, not just in one country but in many countries, and it will require decisive action on the part of some central banks.”