Europe hit back yesterday at US lecturing on its public finances, insisting the eurozone is better off than global rivals as talks on the debt crisis drew to a close.
Governments and central banks need to take out the catastrophic risk to markets- Geithner
The defiant stand came as finance ministers wrapped up two days of talks in Poland that delayed a decision on blocked loans for Greece, failed to resolve a row with Finland which wants collateral, and stirred a fruitless debate about introducing a financial transactions tax.
“Taken as a whole, it is probably better than other major advanced economies,” European Central Bank chief Jean-Claude Trichet said of the 17-nation eurozone’s debt record as the ministers and central bankers from the 27-state European Union headed for the exit.
Discussions were marred last Friday by a spat with guest US Treasury Secretary Timothy Geithner, who prodded the eurozone to take quick action on the debt crisis anchored in Greece.
As police said at least 20,000 workers from around Europe swarmed the streets of Wroclaw to protest against EU-ordered austerity, Trichet described the medium-term prospects as “quite encouraging if you compare with other major advanced economies”.
He tipped a combined year-end, annual deficit of 4.5 per cent of Gross Domestic Product – whereas the US expects its public deficit to reach 8.8 per cent this year.
By the time one factors in “superior” cumulative debt levels elsewhere, Trichet said the overall eurozone outlook was therefore not as endangered as some others.
Credit rating giant Standard and Poor’s stunned leaders when it downgraded the US long-term credit rating last month.
Even before sparring with Geithner last Friday, German Finance Minister Wolfgang Schaeuble had highlighted the US as carrying the world’s heaviest debt burden.
And that was despite a new plan to chop at least $1.2 trillion (€870 billion) over 10 years off the runaway total logged in full public display on a Times Square debt clock in New York City.
Host Poland, which holds the current EU presidency, took the decision to invite Geithner in a sign of spiralling global concerns.
EU financial services commissioner Michel Barnier quipped that the bloc could invite China’s finance minister next time.
“Governments and central banks need to take out the catastrophic risk to markets,” Geithner said in Wroclaw, although Washington later denied he was writing “prescriptions” for Europe.
Geithner urged eurozone leaders to bolster a €440 billion rescue fund for troubled member states, but saw that demand instantly rebuffed by Schaeuble.
Germany instead demanded Washington drop its opposition to a wished-for global financial transactions tax – “emphatically” resisted by Geithner, according to Austria’s Maria Fekter.
“We will do that within the European Union, and maybe also if it’s impossible for the entire EU in the eurozone,” said Belgian Finance Minister Didier Reynders.
Polish Finance Minister Jacek Rostowski, however, highlighted “considerable divisions”, although Schaeuble said he is no longer “that pessimistic”, adding “the arguments are changing”.
Ministers from the 27 EU states cut short their last day of talks in the south-western Polish city before what was an unusually large demonstration by recent Polish standards.
After postponing until October a decision on whether to hand over the next eight billion euros in loans to Greece, the EU and international partners will hold telephone talks with the Athens government tomorrow.