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Little progress in European debt crisis

business Updated: Sep 18, 2011 23:31 IST
Stephen Castle
Stephen Castle
Hindustan Times
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European finance ministers ended a two-day meeting on Saturday without making substantial progress toward solving the region’s debt crisis, or any pledge to recapitalise Europe’s banks.

The meetings were highlighted by the appearance by Timothy F. Geithner, the United States treasury secretary, whose advice, and warnings, drew a tepid reaction from the euro zone’s finance ministers. And Geithner’s rejection on Friday of a European idea for a global tax on financial transactions prompted a debate about whether Europe should go ahead on its own.

Meanwhile, with an October deadline looming for international lenders to agree to the release of around €8 billion, or $11 billion, of aid to Greece, without which it could default on its debt, George Papandreou, the Greek prime minister, cancelled a trip to the United States.

"The coming week is particularly critical for the implementation of the July 21 decisions in the euro area and the initiatives which the country must undertake," Papandreou said in a statement on Saturday.

The attendance of an American official at Friday’s meeting was unusual, and Jacek Rostowski, the finance minister of Poland who invited Geithner, said it showed “unity within the transatlantic family.”

That glossed over the grumbling about Geithner’s comments from several European ministers on Friday, including Maria Fekter of Austria, who publicly said she was unimpressed with Geithner’s contribution.

Yet the American plea for urgent decisions to shore up the euro zone was echoed on Saturday by two European ministers whose nations have stayed outside the single currency.

“The euro zone leaders know that time is running out, that they need to deliver a solution to the uncertainty in the markets,” said George Osborne, Britain’s chancellor of the Exchequer, who told the BBC he wanted action over Greece and the “weakness” in Europe’s banking system.

“The problem is that the politicians seem to be behind the curve all the time,” added Anders Borg, Sweden’s finance minister. “We really need to see some more political leadership,” he said, citing a “clear need for bank recapitalisation.”

Almost two months after a deal was struck on a second bailout of Greece, Finland is holding up its implementation by requesting collateral for new loans — a demand that has complicated the negotiations.

Meanwhile, the Greek government must still convince international lenders that it has done enough to justify the release of the next round of aid.

One European official, not authorised to speak publicly, said the ministers “seemed to come to no operational decisions at all.” The only positive news was an outline agreement on new laws to tighten the rulebook for the euro — though that was struck in Brussels.