Bloomberg News

Geithner Says G-20 Plan Has the ‘Right Elements’ to Stop Crisis

October 15, 2011

(See EXT4 <GO> for more on the euro-area financial crisis and GMEET <GO> for more on the G-20 meeting.)

Oct. 15 (Bloomberg) -- U.S. Treasury Secretary Timothy F. Geithner, attending a meeting of finance ministers and central bankers from the Group of 20 nations, welcomed European efforts to tackle the region’s fiscal crisis.

“The elements of this plan include a much more substantial financial firewall to ensure that the governments of Europe can borrow at sustainable interest rates,” Geithner said at a briefing after the G-20 meeting in Paris today. It also includes “a broad recapitalization of banks, further support for a sustainable program in Greece and steps toward fiscal union.”

European leaders are seeking to stop the fiscal crisis from spreading to larger nations as investors grow increasingly concerned about a Greek default. Slovakia last week became the last euro nation to agree on boosting the firepower of the region’s 440 billion-euro ($610 billion) rescue fund ahead of an Oct. 23 summit in Brussels.

The European Financial Stability Facility, or EFSF, has gained the authority to buy sovereign bonds on the secondary and primary markets, offer credit lines to governments and grant aid to banks as the region’s debt troubles have spread. Its role so far has been to sell bonds to finance rescue loans.

Geithner said the plan would complement “more aggressive action” taken by the European Central Bank while the bailout of Dexia SA helped “limit the potential collateral damage that could have accompanied” the collapse of a bank.

‘More Work’

European leaders “clearly have more work to do on the strategy and the details, but when France and Germany agree on a plan together and decide to act, big things are possible,” Geithner said. The G-20 meeting was also attended by ECB President Jean-Claude Trichet.

The G-20 policy makers are preparing for a Nov. 3-4 summit of global leaders in Cannes, France. In the works is a five- point plan foreseeing a solution for Greece, bolstering of the EFSF rescue fund, fresh capital for banks, a new push to boost competitiveness and consideration of European treaty amendments to tighten economic management.

Geithner didn’t call for expanding funding for the International Monetary Fund. In the statement, the G-20 ministers said they are “committed that the IMF must have the adequate resources to fulfill its systemic responsibilities.”

“The IMF has a substantial arsenal of financial resources, and we would support further use of those existing resources to supplement a comprehensive, well-designed European strategy alongside a more substantial commitment of European resources,” he said.

--Editors: Simone Meier, Craig Stirling

To contact the reporters on this story: Cheyenne Hopkins at chopkins@bloomberg.net

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


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