US Treasury Secretary Timothy Geithner went into exceptional talks with European finance ministers on the debt crisis on Friday, but Finland held to its objections to a new bailout for Greece.
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| US Treasury Secretary Timothy Geithner arrived in Poland Friday for rare talks with European finance ministers after the world\'s main central banks joined forces in a bid to douse the Greece debt fire. |
After the world\'s main central banks joined forces by pumping in liquidity for cash-strapped lenders in a bid to douse the eurozone debt fire, Europe is under growing pressure to end months of bickering over a second financial rescue for the near-bankrupt government in Athens.
As EU nations began crunch talks in Poland, Austria said default for Greece could eventually prove to be the least costly outcome.
"I am very confident, that the next tranche can be disbursed in October," Austrian Finance Minister Maria Fekter said of eight billion euros in blocked existing loans.
But she added: "Should there be a situation, that this way suddenly becomes more expensive than an alternative, we do have to think about this alternative."
Despite Geithner\'s rare presence at EU talks, at the invitation of the current EU president Poland, European counterparts were quick to underscore that the United States itself is carrying the world\'s biggest sovereign debt pile.
"There are problems in Europe and in the United States," said German Finance Minister Wolfgang Schaeuble.
"We have to solve our problems on both sides of the Atlantic, to get more stability in the financial markets."
Warning of a "weakening" in global growth, he said both sides had their work cut out.
"We Europeans have to do our homework together and the Americans have to do theirs.. We\'re not telling each other what to do, but we\'re exchanging views," he added.
Belgian Finance Minister Didier Reynders echoed that.
"First of all I want to know how it is possible in the US to go back to a balance situation," he said, referring to the US deficit.
Geithner, wary that the crisis could spread far beyond Europe\'s shores and tip America back into recession, did not himself speak to waiting reporters.
"One thing\'s for sure, he hasn\'t just come to pick mushrooms in our beautiful forests," said Polish Finance Minister Jacek Rostowski.
Driven by taxpayers tired of funding repeated bailouts, Finland\'s finance minister said anger among partners over its demand for cash collateral from Athens before handing over further loans was far from resolved.
"I think we are going to negotiate about it, but unfortunately I don\'t see that we can find a solution tonight," Jutta Urpilainen told reporters.
The Finnish demand for collateral followed April\'s electoral breakthrough for a far-right party opposed to further bailouts.
Reynders warned that "if Finland wants guarantees, it will obviously get a lesser return."
Austria\'s Fekter said that guarantees should only be acceptable if "open for all... there should be a solution everybody can use if they want to."
In Washington, IMF managing director Christine Lagarde called for bolder action on both sides of the Atlantic.
After Brazil, Russia, India, China and South Africa signalled they would intervene to prop up European government debt, the eurozone, US, Japanese, Swiss and British central banks leapt into action on Thursday.
They announced they will inject untold reserves of dollars into commercial banks threatened by their exposure to the eurozone\'s debt mountain, providing a lift to bruised banking stocks and the euro currency.
In Wroclaw, ECB president Jean-Claude Trichet said such coordinated moves represent "a pillar of stability and confidence".
The European Commission now tips a mere 0.1 percent growth for the final three months of the year, worse than previously thought. EU economic affairs commissioner Olli Rehn warned that "financial market turmoil is set to dampen the real economy.
With markets convinced that Athens is headed towards default, and some suggesting it could ditch the euro, French President Nicolas Sarkozy and German Chancellor Angela Merkel insisted Wednesday that Greece belongs in the eurozone.
In a three-way call with the French and German leaders, Greek Prime Minister George Papandreou promised to apply overdue reforms demanded in return for eight billion euros of agreed loans currently on ice.
Rehn said he expected auditors from the EU, ECB and IMF to complete their review of Greece\'s efforts by the end of September.
But the eurozone also has to resolve Slovakia\'s refusal to stage an early parliamentary vote on ratification of the second, 160-billion-euro bailout agreed in principle back in July.
A senior EU official told AFP in Wroclaw that Slovakia, which sat out the first Greek bailout in May 2010, could again be allowed to keep its money provided it brings forward legal acceptance of plans to revamp the powers granted to a broader eurozone rescue fund.
"I trust this will be concluded by end September-early October at the latest," Rehn said of full, 17-nation ratification.
