Europe swipes back after US debt jibe

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Europe swipes back after US debt jibe

The European Central Bank defended the eurozone’s handling of its public finances, saying the bloc was better off than global rivals, after the US lectured Europe on its debt.

By (AFP)

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Published: Sat 17 Sep 2011, 6:01 PM

Last updated: Tue 7 Apr 2015, 5:51 AM

‘Taken as a whole, it is probably better than other major advanced economies,’ ECB chief Jean-Claude Trichet said at the close of talks in Poland among European Union finance ministers marred on Friday by a spat with guest US Treasury Secretary Timothy Geithner.

As unions prepared a mass protest against European austerity measures, Trichet desribing the eurozone’s medium-term prospects as ‘quite encouraging compared with other major advanced economies’ and also tipped a combined year-end, annual deficit level of 4.5 percent of GDP.

Adding in ‘superior’ cumulative debt levels elsewhere at ‘around 10 percent’ of gross domestic product, Trichet said the eurozone outlook was therefore not as endangered as some others.

Credit rating giant Standard & Poor’s downgraded the US long-term credit rating last month.

Hosts Poland, the current EU chair, took the decision to invite Geithner to the talks on Friday, in a sign of spiralling global concerns — and EU ministers said the American was there to pass on lessons from stateside.

‘Governments and central banks need to take out the catastrophic risk to markets,’ Geithner said on the sidelines of the talks, although Washington later denied he was writing ‘prescriptions’ for Europe.

Geithner and German Finance Minister Wolfgang Schaeuble clashed sharply on Friday over the way forward.

Geithner urged eurozone leaders to bolster a 440-billion-euro ($607 billion) rescue fund for troubled member states, but saw that demand instantly rebuffed by Germany.

Berlin instead demanded Washington drop its opposition to a global financial transactions tax — ‘emphatically’ resisted by Geithner, according to Austria’s Maria Fekter.

Both Schaeuble and Belgian Finance Minister Didier Reynders had highlighted the United States as carrying the world’s heaviest debt burden going into the discussions.

‘Yes it’s better to organise something on financial transactions on the worldwide level, but it’s impossible,’ Reynders said in Wroclaw on Saturday.

‘We will do that within the European Union, and maybe also if it’s impossible for the entire EU in the eurozone,’ he added.

Europeans have sought to implement either a tax on profits or turnover from the financial sector since governments were forced to bail out banks caught up in the 2008 credit crunch that started in the United States.

But Polish Finance Minister Jacek Rostowski said a preliminary debate on Friday ‘raised a lot of emotions’ and outlined ‘considerable divisions.’

Ministers from the 27 EU states cut short their second day of talks in the southwestern Polish city of Wroclaw, with thousands of anti-austerity protesters from around Europe planning to march to the venue in the middle of the day.

At Friday’s talks, eurozone nations decided to postpone until October a decision on whether to hand over the next tranche of an agreed emergency loan package to Greece — the eurozone member in the eye of the storm — worth eight billion euros ($11.0 billion).

On the Greek and eurozone debt crisis, Luxembourg’s Finance Minister Luc Frieden told reporters it was time for deeds, not just words, about fiscal responsibility and economic coordination, primarily within the EU’s 17-nation eurozone.

‘I think we have not yet arrived where a full currency union should be and the crisis has shown that it’s not enough to have club rules, they need to be enforced, and everything that can contribute to that is absolutely necessary,’ he said.

Renewed aid for Greece, after an earlier bailout proved insufficient, has been mired in rows with Finland over its demand for collateral for loan guarantees, and with Slovakia which has threatened to delay parliamentary ratification.

‘We have to continue the negotiations,’ Finland’s Finance Minister Jutta Urpilainen said. Asked if there had been progress, she responded: ‘There’s nothing new.’

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