International

Europe stalls on crisis, resists U.S. pressure to provide solution

WROCLAW, Poland: Eurozone finance ministers resisted U.S. pressure to provide a decisive solution to the debt crisis Friday, saying they would delay until October a decision on paying out more bailout loans to Greece to prevent a disastrous government default.

The delay was yet another example of Europe’s halting effort over almost two years to solve its difficulties over too much government debt in some countries. Markets have been extremely volatile in recent weeks on concerns about the crisis, but barely moved on news from the meeting as expectations were already low.

Despite the lack of big announcements, the mood among officials at the meeting in Wroclaw, Poland, was at times edgy, with Austria’s finance minister criticizing U.S. Treasury chief Timothy Geithner for not listening to European ideas.

Maria Fekter said Geithner – the first American. finance chief to join such a eurozone meeting – in “very dramatic terms” urged the Europeans to get a grip on the crisis, but she faulted him for not being responsive to suggestions. She said he ruled out a tax on financial transactions, which some euro countries see as a way of funding expensive bailouts.

“I would have expected that, if he explains the world to us, that he would also listen to what we want to explain to the Americans,” Fekter said.

Geithner had joined the meeting in a sign of how the U.S. is increasingly concerned over the global impact of the eurozone debt crisis.

However, his presence seemed to yield little at the meeting, where European officials appeared unable to make much progress on any of several fronts.

The European finance chiefs ruled out providing more fiscal stimulus to get their lackluster economies growing again, saying high debts left no space for extra spending. Another sticking point in the aid for Greece, a Finnish demand for collateral for a second bailout now being put together, was not solved either.

The payout of the next 8 billion euros ($11 billion) installment of Greece’s first bailout package depends on a review of the country’s finances. The disbursement was originally scheduled for the end of September and the Greek government has said that without the new loan it will run out of money next month, forcing it to stop paying public-sector salaries and eventually default on its massive debts.

Officials from the eurozone and the International Monetary Fund have delayed their assessment until Greece has laid out a clear plan on how it will cut its deficits to targets agreed in its bailout program, said Jean-Claude Juncker, the prime minister of Luxembourg who also chairs the regular meetings of eurozone finance ministers.

Juncker said officials welcomed “the renewed, firm commitment of Greece” to its austerity program and said they “would decide in October on the next tranche.”

A delegation from the eurozone, the IMF and the European Central Bank unexpectedly left Athens on Sept. 2, delaying the much-awaited confirmation that Greece was meeting the terms of its 110 billion euro ($152 billion) bailout agreed in May, 2010.

The country’s struggle to keep a lid on its spending and raise enough revenue has also increased uncertainty about a second 109 billion euro aid package agreed July 21, when it became clear that the first batch of money would not be enough.

Fears that Greece might not get more rescue money and default have made Greek bond prices plummet, weighed on the euro’s exchange rate with the dollar and roiled stock markets. Rumors and speculation by public officials about Greece defaulting or leaving the euro have helped keep the sense of crisis going.

 
A version of this article appeared in the print edition of The Daily Star on September 17, 2011, on page 5.

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