Bloomberg News

U.S. Will Intensify Pressure on Europe at G-20, Brainard Says

October 12, 2011

(See GMEET <GO> for more on the G-20 meetings.)

Oct. 12 (Bloomberg) -- The U.S. will intensify its call for forceful action to stem Europe’s debt crisis at a meeting of Group of 20 nations in Paris this week, the Treasury Department’s top international official said.

“The consequences of delay are growing,” Lael Brainard, Treasury undersecretary for international affairs, said in a press briefing in Washington today. “Against a backdrop of elevated risks to the recovery, the United States will intensify our call for resolute action.”

Treasury Secretary Timothy F. Geithner will attend the G-20 finance ministers meeting Oct. 13-14. European officials are trying to resolve the continent’s debt crisis, which has pushed Greece to the brink of default, shaken world markets and fueled speculation the 17-nation euro currency might not survive in its current form.

“The Europeans recognize that they have to put in place a much more substantial, much more powerful response if they’re going to achieve their objectives, which is helping countries reform,” Geithner said in a Bloomberg Television interview yesterday.

Brainard, asked whether the International Monetary Fund should step up aid to Europe, said the organization already is playing an important role. The Washington-based IMF, with close to $400 billion dollars available to lend, has “ample” capacity, she said.

Progress in China

On China, Brainard reiterated the Obama administration’s view that the nation has shown “progress” on allowing its currency to strengthen even as the U.S. “would like to see a faster rate of appreciation.” The Chinese yuan has gained about 10 percent in real terms against the U.S. dollar since mid-2010.

German and French leaders pledged at a meeting Oct. 9 to devise a plan to recapitalize banks, help Greece and strengthen Europe’s economic governance. German Chancellor Angela Merkel, after meeting French President Nicholas Sarkozy, said Europe will do “everything necessary” to ensure that banks have enough capital.

“U.S. authorities are concerned that the Europeans have not put enough money in the window, in some sense, to convince the markets,” Edwin M. Truman, a senior fellow with the Peterson Institute for International Economics, said in an interview.

The European Union’s top banking regulator has discussed plans to require banks to maintain a capital benchmark of 9 percent following a review of their reserve levels, according to a person familiar with the talks.

Capital Threshold

That figure would be a benchmark for assessing whether lenders have enough capital to withstand sovereign-debt writedowns in the wake of the crisis, said the person, who can’t be identified because the talks are private. The European Banking Authority discussed the possible 9 percent threshold at a meeting of its supervisory board in London last week, the person said.

A Geithner trip to Poland last month ended with European counterparts rebuffing his suggestions and taking shots at U.S. economic woes.

U.S. officials will likely continue their message that Europe needs “to recapitalize their banks or impose losses on private investors,” said Phillip Swagel, who was an assistant Treasury secretary for economic policy in the George W. Bush administration. “The longer they wait, the more uncertainty there will be.”

--With assistance from Sandrine Rastello in Washington, Ben Moshinsky in London and Aaron Kirchfeld in Frankfurt. Editors: Chris Wellisz, Paul Badertscher

To contact the reporters on this story: Ian Katz in Washington at Ikatz2@bloomberg.net; Cheyenne Hopkins at Chopkins19@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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