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Europe's finance ministers reach no accord on debt crisis

U.S. Treasury Secretary Timothy Geithner warns them to hurry, but his reception is less than warm. Greece faces a delay in getting the latest installment of its bailout money.

September 16, 2011|By Henry Chu, Los Angeles Times
  • A police officer uses a fire extinguisher to put out the flames after a man set himself on fire outside a bank in the northern port city of Thessaloniki, Greece. It was the third attempted self-immolation by the former small-business owner, who says he was ruined after taking out a series of loans. The 56-year-old was hospitalized but was expected to survive.
A police officer uses a fire extinguisher to put out the flames after a man… (Nontas Stlianidis, Associated…)

Reporting from London — Despite strong pressure on them to act, European finance ministers offered no new measures Friday either to tackle the region's worsening debt crisis or to spur growth in their floundering economies.

Instead, at a meeting in Wroclaw, Poland, officials heard U.S. Treasury Secretary Timothy Geithner warn them not to dally in coming to grips with a deteriorating situation that analysts say has the potential to cause major disruption in the global economy.

The finance ministers also indicated that near-bankrupt Greece, the epicenter of the Eurozone's troubles, would not receive a crucial infusion of previously approved emergency loans before early October. The Mediterranean nation needs the money if it is to pay its bills past the middle of the month.

The delay in handing out those loans, originally to be disbursed by the end of September, is likely to fray the nerves of investors who are increasingly bracing for a Greek default. Fear of such an eventuality sparked wild swings in European stock markets this week.

The inconclusive meeting in Poland, at which officials failed to iron out differences over a proposed second bailout package for Greece, illustrated the continuing difficulty of achieving quick action from countries bound by a single currency but divided by domestic politics. Although the financial markets and world leaders have repeatedly pressed for bold, decisive measures, Europe's politicians have been unable to deliver.

Still, the region's stock exchanges generally held even Friday, steadied by the announcement a day earlier that central banks around the world, including the U.S. Federal Reserve, would offer easy access to loans for cash-strapped European banks.

The gravity of the debt crisis prompted the unusual invitation to Geithner to attend the finance ministers meeting. His appearance was billed as a chance for a transatlantic exchange of views at a critical juncture in the long-running euro crisis, which many analysts feel may be coming to a head.

Geithner told his European counterparts that he attended the meeting "with humility," acknowledging the United States' own serious problems regarding debt and a possible double-dip recession.

"We're not in a particularly strong position to provide advice to all of you," he said.

But he then went on to warn the assembly that Europe needed to unite and show collective will in trying to resolve the debt crisis.

Geithner recommended that countries in the Eurozone, which all use the euro currency, significantly expand the capacity of their joint bailout fund in a show of force to reassure investors, the Reuters news agency reported.

"He conveyed dramatically that we need to commit money to avoid bringing the system into difficulty," Austrian Finance Minister Maria Fekter told reporters.

But Fekter complained that Geithner was dismissive of an idea floated by countries such as Germany to use a financial transaction tax, rather than taxpayer money, to beef up the bailout fund. Popular sentiment in Germany, Austria, the Netherlands and Finland is strongly against any more taxpayer money being sunk into rescuing ailing nations.

"I found it peculiar that even though the Americans have significantly worse fundamental data than the Eurozone, that they tell us what we should do, and when we make a suggestion … that they say no straight away," Fekter said.

In a testy rebuke of Geithner, Jean-Claude Juncker, prime minister and finance minister of Luxembourg, said, "We are not discussing the increase or the expansion of [the bailout fund] with a nonmember of the euro area."

But the ministers remain unable to agree among themselves on some of the details of a second bailout package for Greece, which leaders agreed to in principle in July but still awaits ratification from the parliaments of all 17 Eurozone nations.

Finland's insistence on collecting collateral from Greece on its share of any emergency loans has stirred up strife within the zone and could delay, or even scupper, approval of the bailout. No breakthrough in discussions was achieved Friday.

Athens is desperately awaiting the release of about $11 billion in loans from its first rescue package, an installment it needs to keep the government functioning past mid-October.

Inspectors from the European Union and the International Monetary Fund are due back in Greece in coming days to examine its progress in meeting targets for reduced spending and increased tax collection. The inspectors must be satisfied with Greece's efforts for the next batch of loans to be disbursed.

Meetings between the two sides broke off in rancor this month, with the EU and the IMF warning Athens that it was falling short.

Greece's announcement of a new property tax has led to speculation that the international inspection team will sign off on the loans. But the money will come in later than expected, adding to the air of uncertainty that has aggravated the debt crisis.

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