Geithner urged the finance ministers to pump money into their economies now to try to avert a financial downturn, even as they work to reduce longer-term indebtedness. He suggested expanding a fund meant to backstop the continent’s governments.
“Your financial challenges in Europe are eminently in your capacity to manage financially, you just have to choose to do it,” Geithner said at a conference after the closed-door meeting in Wroclaw, Poland, according to wire reports. He exhorted the officials to work to take “catastrophic” possibilities off the table and end “loose talk” about the euro currency zone collapsing.
The Europeans did not react favorably to being told what to do by an American.
“I found it peculiar that even though the Americans have significantly worse fundamental data than the euro zone that they tell us what we should do,” Austrian finance minister Maria Fekter told reporters after the meeting.
“We are not discussing the expansion or increase of the [financial stability fund] with a non-member of the euro area,” said Jean-Claude Juncker, the prime minister of Luxembourg and chairman of the group of finance ministers, according to wire reports.
Juncker was even more direct in rejecting Geithner’s argument that European governments should seek to stimulate their economies in the near term.
“We have slightly different views from time to time with our U.S. colleagues when it comes to fiscal stimulus packages,” he told reporters. “We don’t see any room for maneuver in the euro area which could allow us to launch new fiscal stimulus packages.”
European officials appear to agree that they need to speak with a unified voice, but it is less clear that they can concur on specific policies. Financially stronger countries such as Germany, the Netherlands and Finland are reluctant to put their nations on the hook for bailouts of weaker ones, such as Spain and Italy, but face the reality that failure to backstop those countries’ debts could cause even more pain for economies that are already stagnating.
U.S. officials have been in frequent private contact with their counterparts in Europe, urging coordinated action in strong terms. But their public statements have been more vague and less accusatory. With his trip to Poland and in recent interviews, Geithner has escalated public pressure on the Europeans to act.
The risk in the strategy is that the United States could be seen as meddlesome by some of the very leaders Geithner seeks to influence — a risk he saw firsthand as a Treasury official in the 1990s when efforts to deal with the East Asia crisis were undermined by Asian leaders’ anger at U.S. and International Monetary Fund officials.
The European Union will not decide whether to give Greece a new installment of bailout money until October, officials said Friday, lengthening the uncertainty about whether the troubled country will default on its debts. Investors had hoped for a quicker sense about the direction of the bailout.
There is agreement among European leaders that there needs to be bold, coherent action; the problem is that different countries have different ideas of what form that might take.
“Our permanent message is of course to be ahead of the curve,” European Central Bank President Jean-Claude Trichet told reporters in Poland, according to wire reports. “All that I heard goes in this direction. But the problems are not words, the problems are deeds.”
Hopes for quick answers about the fate of $11 billion in aid for Greece were dashed even before Friday’s meeting started, when Finnish finance minister Jutta Urpilainen said she anticipated protracted discussions over her country’s demand for Greek collateral before it draws on another series of bailout loans.
After Finland made its demand for the guarantees, other countries also asked for similar assurances, which could diminish the amount of money available for Greece.
Urpilainen has said she expects that the euro-area countries will find a solution that is acceptable to them all. If Greece does not receive the extra $11 billion in aid at the end of the month, it will run out of money by mid-October.
Birnbaum reported from Berlin.