(Updates with Geithner comments starting in fourth paragraph.)
Nov. 15 (Bloomberg) -- Treasury Secretary Timothy F. Geithner said Europe’s “basic challenge” is to stabilize its financial system and ensure that Italy and Spain can borrow at “affordable interest rates.”
Europe must also “make sure that there’s progress on these reforms to make growth stronger and to resolve the basic fiscal financial challenges,” Geithner said at a conference in Washington today. “That’s a difficult balance and you can see they’re struggling with it.”
European stocks declined today as Italy’s premier in waiting, Mario Monti, struggled to get political parties to help form his new Cabinet. Monti, a former European Union competition commissioner, is trying to get political parties to agree to participate in his so-called technical Cabinet.
European governments have the most important role in resolving the region’s debt crisis, followed by the European Central Bank and the International Monetary Fund, Geithner said.
The IMF can give advice on shaping reform plans, assess progress and “provide some financial assistance,” Geithner said. “Although for a continent like Europe, the IMF’s financial role will be supplementary, more limited.”
On the U.S, Geithner said housing “mostly reflects the overall weakness in the economy.”
“You can’t engineer a recovery in housing that can lift the broader economy up, so it has to be the other way around,” he said. “That’s not an argument for saying, ‘Get growth stronger and ignore housing.’” The Obama administration and Congress must do as much as they can “to get more force and power to the economy tied to long-term fiscal reforms.”
--Editors: Carlos Torres, Kevin Costelloe
To contact the reporters on this story: Ian Katz in Washington at firstname.lastname@example.org; Cheyenne Hopkins at Chopkins19@bloomberg.net.
To contact the editor responsible for this story: Christopher Wellisz at email@example.com