Monday 18 December 2017

Debt Crisis: EU leaders reject US finance chief Geithner’s call to increase rescue fund

US Treasury Secretary Timothy F Geithner. Photo: Getty Images
US Treasury Secretary Timothy F Geithner. Photo: Getty Images reporters

Some Eurozone finance leaders have rejected calls from US Treasury Secretary Timothy Geithner to expand the scope of the area’s €440bn bailout fund in a bid to stall the region’s debt crisis and prevent contagion.

According to Austrian minister Maria Fekter, Germany’s finance chief Wolfgang Schaeuble told Mr Geithner that it would not be possible to raise the European Financial Stability Facility (EFSF) because taxpayers in richer countries like the area’s biggest economy would be left to foot the bill.

“He (Geithner) conveyed dramatically that we need to commit money to avoid bringing the system into difficulty ... (but) Schaeuble made him very aware that it was unlikely to be possible to push that onto taxpayers, and especially not if (burden) is imposed mainly on the triple-A countries," she said.

Mr Geithner’s presence in the Polish city of Wroclaw, where eurozone finance chiefs are having an informal meeting, shows how deep the concern is in Washington of contagion from the eurozone debt crisis, particularly the damage it could impact on the banking sector.

In addition, Greece is heading towards a default while concerns have also been raised about the level of debt on the books of bigger countries like Spain and Italy.

Mr Geithner also warned finance ministers of the dangers of “loose talk” about dismantling the institutions of the euro.

“What is very damaging (in Europe) from the outside is not the divisiveness about the broader debate, about strategy, but about the ongoing conflict between governments and the central bank, and you need both to work together to do what is essential to the resolution of any crisis,” he said, after the meeting ended.

He also rejected the idea of a financial transactions tax.

Meanwhile, Jean-Claude Juncker, president of the Eurogroup and Luxembourg prime minister, praised the efforts of Ireland and Portugal to get their finances back in order.

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