European finance ministers ruled out efforts to spur the
faltering economy and showed no signs of taking up a proposal by
U.S. Treasury Secretary Timothy
Geithner to increase the firepower of the debt crisis rescue
fund.
Inviting Geithner to a euro meeting for the first time, the
European finance chiefs said the 18-month debt crisis leaves no
room for tax cuts or extra spending to spur an economy on the brink
of stagnation.
“We have slightly different views from time to time with our
U.S. colleagues when it comes to fiscal-stimulus packages,”
Luxembourg Prime Minister Jean-Claude
Juncker told reporters after chairing the meeting yesterday in
Wroclaw, Poland. “We don’t see any room for maneuver in the euro
area which could allow us to launch new fiscal stimulus packages.
That will not be possible.”
Europe’s economy will barely grow in the second half of 2011, a
casualty of the debt buildup that 256 billion euros ($353 billion)
in aid for Greece, Ireland and Portugal has failed to
extinguish.
Geithner made little headway with a call for Europe to boost the
capacity of the 440 billion-euro rescue fund, known as the European
Financial Stability Facility, by enabling it to tap the European
Central Bank.
Juncker said there was no discussion of expanding the fund today
-- at least not while the American guest was in the room.
“We are not discussing the increase or the expansion of the EFSF
with a non-member of the euro area,” he said. German Finance
Minister Wolfgang
Schaeuble spoke of a “very intensive but friendly discussion”
and Austrian Finance Minister Maria Fekter found it “peculiar” to
be lectured by the U.S., a country with higher aggregate debt than
the euro area.
Instead, the ministers recommitted to a July 21 decision to
empower the fund to buy bonds in the primary and secondary market,
offer precautionary credit lines and create a bank-
recapitalization facility. The target for completing national
approvals of the new powers slipped to mid-October.
Geithner preached the lessons of the emergency banking support
provided by the Treasury and Federal Reserve
in reaction to the collapse of Lehman Brothers Holdings Inc.,
mixing it with criticism of Europe’s crisis-management
coordination.
Europe projects an image of “ongoing conflict” between national
governments and the central bank, hampering efforts to put the
economy on a sounder footing, Geithner said at a banking conference
in between euro meetings.
“Your financial challenges in Europe are eminently in your
capacity to manage financially, you just have to choose to do it,”
he said.
Echoes of that appeal came from ECB President Jean-Claude
Trichet, six weeks from the end of an eight-year term as the
overseer of euro interest
rates.
“Our permanent message is of course to be ahead of the curve,”
Trichet told reporters. “All that I heard goes in this direction.
But the problems are not words, the problems are deeds.”
The ECB was in the forefront again this week, joining other
major central banks in offering dollar loans to ease a liquidity
crunch that had confronted European banks with the highest costs
for obtaining the U.S. currency in almost three years.
Finance chiefs stuck by the view that commercial banks have
enough capital to ride out the turbulence that has driven the bonds
of Greece, the epicenter of
the crisis, to less than half their nominal value.
Trichet hailed an accord between governments and the European
Parliament that will tighten the euro area’s economic management
and make it easier to impose sanctions on countries that overstep
the budget-deficit limit of 3 percent of gross domestic
product.
The new rules, to take effect by Jan. 1, mark a “substantial
improvement,” Trichet said.
The debt overhang is taking its toll on the wider economy, the
European Commission says. It
cut its growth forecast this week to 0.2 percent for the third
quarter and 0.1 percent in the fourth, down from projections of 0.4
percent for both periods.
“Recovery is stalling in the second half of the year, but we do
not forecast a return to recession,” European Union Economic and
Monetary Commissioner Olli Rehn said. “Uncertainty and stress in
financial markets is now having negative ramifications in the real
economy and is hampering our growth prospects.”
Greece is now looking to the ministers’ next meeting, on Oct. 3,
for a decision on the release of an 8 billion-euro aid installment.
The loan would be disbursed by mid-October, enabling the government
to pay its bills through the end of the year.
The fate of future Greek loans remains tied up by a demand by
Finland, one of Europe’s
six AAA rated countries, that it receive collateral, potentially in
the form of real estate or shares in nationalized Greek banks.
While a final agreement eluded them, the ministers agreed on the
principle that collateral must carry a cost, with the goal of
limiting its use to Finland.
“There is unity that collateral, first of all, must be open to
all and, second, must cost something,” Austria’s Fekter said.
On personnel matters, the officials set a Sept. 27 deadline for
nominations to replace Germany’s Juergen Stark
on the ECB’s Executive Board. Stark, an opponent of the bank’s
bond-purchase program, said last week he will quit before his term
ends in May 2014.
The only candidate so far is German Deputy Finance Minister
Joerg
Asmussen.
from bloomberg
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arent US the one who started the whole economic problem?
US have much more debts than the EU. yet he went to europe to
'preach' to them? we all know the US plans arent
working. it only increased their debts.
amazing american!!!