The UN chief urges international community to work together to prevent any actions that could push the entire Middle East over the edge
US Treasury Secretary Timothy Geithner and German Finance Minister Wolfgang Schaeuble disagreed sharply over the way forward, with an American call to boost rescue funding running headlong into a European demand for the States to tax financial transactions.
“We are not discussing the increase or the expansion of the EFSF (European Financial Stability Facility) with a non-member of the euro area,” eurozone chief Jean-Claude Juncker said as deep differences on strategy emerged.
Geithner urged eurozone leaders to bolster the rescue fund, but saw that demand instantly rebuffed by Germany — which then demanded Washington drop its opposition to a global financial transactions tax, “emphatically” resisted by Geithner.
Austria’s Finance Minister Maria Fekter said Geithner urged Europe to increase the size of its 440-billion-euro ($607 billion) EFSF for troubled member states and take more action to shore up the financial and banking sector.
But Schaeuble insisted that taxpayers alone could not bear the burden, leaving both sides at odds.
“What’s very damaging is not just seeing the divisiveness in the debate over strategy in Europe but the ongoing conflict between countries and the [European] Central Bank,” Geithner said on the sidelines of the talks in Wroclaw, southwest Poland.
“Governments and central banks need to take out the catastrophic risk to markets,” he said after the non-euro hosts took the rare step of inviting him to attend — ahead of other non-euro EU states like Britain.
The US Treasury’s calls came after eurozone, US, Japanese, Swiss and British central banks took markets by surprise Thursday, announcing they will provide dollars to commercial banks threatened by exposure to the eurozone’s debt mountain.
Banks, particularly in Europe and France, have been starved of their normal sources of finance, scared off by prospects that eurozone debt contagion could hit the financial sector.
Emerging economies have indicated that they will hold talks next week on possibly buying debt issued by weak eurozone countries.
Earlier eurozone nations decided to postpone a decision on the next tranche of Greek rescue funding worth eight billion euros ($11.0 billion) until October.
He reiterated that “full implementation” by Athens of austerity and modernisation commitments was crucial.
Greek Finance Minister Evangelos Venizelos insisted his country was “on track.”
Greek officials have warned they will run out of funds to pay pensions and state salaries in October.
A second Greek bailout has also been mired in rows with Finland over its demand for collateral for bailout loan guarantees, and with Slovakia which has threatened to delay parliamentary ratification.
European Central Bank chief Jean-Claude Trichet said that, overall, the “problem is not words, the problem is deeds”.
On the collateral issue, unhappy partners ganged up on Finland to say it would have to accept a lesser return on loans if it demanded up-front protection.
Europe needs Finland to ratify new powers for the EFSF in a hurry, but a spokesman for the Helsinki government said it it wasn’t giving up its demand for collateral.
Under questioning by reporters in Wroclaw, Austria’s Fekter appeared to suggest that default for Greece could eventually prove to be the least costly outcome.
“Should there be a situation, that [the present bailout approach] suddenly becomes more expensive than an alternative, we do have to think about this alternative,” she said.
Later on Friday, ministers from across the EU hope to wrap up an agreement on a “six-pack” of new laws that will at long last sanction states that break existing budget rules.
The UN chief urges international community to work together to prevent any actions that could push the entire Middle East over the edge
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