Europe

Friday, July 27, 2012 - 17:55

Repeat: No Major Announcements Seen For Geithner Germany Trip


--Repeating Updated Story Published 16:57 ET Friday

WASHINGTON (MNI) - Amid signs of a more concerted European push for crisis action, Treasury Secretary Tim Geithner is visiting both the German finance minister and the head of the European Central Bank Monday, the Treasury Department confirmed Friday.

A Treasury Department official said no major announcements are expected during the trip.

Having warned this week of a Europe at the edge of "the abyss," Geithner will travel first to the North Sea resort island of Sylt to visit German Finance Minister Wolfgang Schaueble at his vacation spot and then will go to Frankurt to talk to European Central Bank President Mario Draghi.

The U.S. Treasury Department waited until the U.S. stock markets closed to confirm the trip, which was announced several hours earlier by the German Finance Ministry. Although a joint news conference was originally planned, Schaueble and Geithner now will only pose for pictures and not answer questions.

A Treasury official said Geithner has been looking for an opportunity to visit European officials since the G20 meeting in Mexico in June and thought prior to the August vacation period would be a good time.

The trip coincides with an end-of-the week rally in European and U.S. stocks markets that started to build momentum after Draghi said the ECB would do what it takes to save the eurozone.

Just three days ago, in an interview on the PBS Charlie Rose Show, Geithner said while European authorities have committed to do what it takes to hold their financial system together, "They have not been fully successful yet in making that commitment."

He went on to say that a "good way to think about the challenge" in Europe is to say, "If you leave Europe on the edge of the abyss, if you leave it just teetering on the edge of financial disaster, it'll be much harder for this strategy to work."

Countries like Spain and Italy, he said, "are doing very hard, very tough, very necessary things" and, he added, "for this to work politically for Europe and economically for Europe, those reforms need to be complemented by more support."

He agreed when Rose interjected, "Some say that Chancellor (Angela) Merkel believes that she can always come in a rescue at the last moment." Geithner responded, "That's right."

Geithner then expressed sympathy for Merkel's position. "What she's very worried about is that if they relieve too much of the pressure, the incentive for reform will fade and they'll have spent a bunch of taxpayer's money of Germany without any real return to make Europe better."

He continued, "And again, if you leave Europe on the edge of the abyss as your source of leverage, your strategy's unlikely to work because you're going to raise the ultimate cost of the crisis -- much more expensive to fix and you're going to -- you do a lot of damage to the politics of those countries because the human costs of what's happening, not just in Greece but across Europe now are enormously high."

Geithner repeated that he thinks the Eurozone will survive intact with its 17 members. "They've said 'We will do everything it takes to hold the European Union together.' And you could say that's what they're trying to do, is to make it viable for the long run."

In another part of the Rose program, Geithner responded to a question about the effect Europe's problems are having on the United States by agreeing the effect is notable.

"Yeah it's reducing demand for U.S. businesses, for the things they produce and sell both in Europe and around the world. It's helping slow growth everywhere, not just in Europe," he said.

Concern that "this crisis could intensify is also causing businesses everywhere to pull back."

Earlier Friday, Schaueble appeared to welcome Draghi's pledge to do whatever is necessary to save the euro, and repeated there is a necessary precondition, that "politicians also take and implement the necessary measures to overcome the financial and confidence crisis."

A spokeswoman for the Spanish government Friday denied reports that Spain early in the week discussed with Schaueble the possible need for a 300 billion euro rescue if its borrowing costs -- which moderated somewhat later in the week -- remain high.

In its annual review of Spain's economy, the IMF Friday said the country's economy will shrink by 1.7% this year and included a warning of "significant downside risks." The IMF also saw further contraction next year of 1.2% for GDP. Both estimates were worse than the IMF's previous readings.

The Treasury Department said no other top U.S. officials will be traveling with Geithner and he will be accompanied by only a very small group of aides.

** MNI Washington Bureau: 202-371-2121 **

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