U.S. Treasury Secretary Timothy Geithner and German
Finance Minister Wolfgang Schaeuble called on European states Monday
to press on with economic reforms to help resolve the region's
financial crisis and bolster confidence in the euro.
After talks with Schaeuble on the northern German holiday island
of Sylt, where the finance minister is holidaying, Geithner travelled
to Frankfurt for a meeting with European Central Bank (ECB) chief
Mario Draghi.
In a joint statement, Schaeuble and Geithner said they "took note
of statements from European leaders last week to take whatever steps
are necessary to safeguard financial stability in the euro area."
Geithner's visit to Germany came as a top European official said
the 17-member eurozone had reached a critical point in its battle to
overcome the debt crisis and that leaders would now work with the ECB
to stabilize the euro.
In a series of newspaper interviews, eurogroup head Jean-Claude
Juncker said European leaders would decide in the next few days on
measures aimed at stemming high borrowing costs in nations at the
centre of the crisis, notably Spain.
"There is no time to lose," said Juncker, who is also Prime
Minister of Luxembourg."We have come to a crucial point," he told
French daily Le Figaro. The eurogroup comprises eurozone finance
ministers.
But in their statement, Schaeuble and Geithner stressed the
progress that individual nations had made in facing up to the crisis.
"Both expressed confidence in euro area member states' efforts to
reform and move towards greater integration," the statement said.
Schaeuble and Geithner also welcomed Ireland's return to
government bond markets and Portugal's success in knocking its
finances into shape.
They also "discussed the considerable efforts undertaken by Spain
and Italy, to pursue far-reaching fiscal and structural reforms," the
statement said.
In his media comments, Juncker made reference to the ECB and the
euro bailout fund, the European Financial Stability Facility (EFSF),
working together.
Media reports suggested that the ECB would link up with the EFSF
to bolster the eurozone, possibly by buying the bonds of heavily
indebted states such as Spain and Italy.
But a European Commission spokesman said Monday, "there are no
requests as of today" for activating bond-buying by the euro rescue
operations.
In the meantime, as a reminder of the bleak state of the eurozone
economy, the European Commission said its closely watched Economic
Sentiment Indicator for the region fell for the fourth consecutive
month in July.
"Today's dismal figures only increase the pressure on European
policy makers to act decisively to stop the rot in the eurozone,"
said ING Bank economist Peter Vanden Houte.
Geithner's talks with Draghi come in the buildup to a key meeting
of the ECB's governing council on Thursday.
Market expectations have been rising that the ECB is planning new
action to head off the crisis, which is now in its third year.
This follows a speech by Draghi on Thursday when he insisted that
the ECB would do all that is necessary to preserve the euro.
However the ECB said Monday that, once again, it had not made any
government bond purchases last week. The ECB's bond purchasing
programme has been on hold since the middle of of March.
In the meantime, Spain's bond yields have soared to record highs
amid concerns that the eurozone's fourth-biggest economy will be
forced to tap Europe's bailout fund for a sovereign debt rescue.
Geithner's talks with Schaeuble and his visit to the ECB also
followed concerns that the eurozone debt crisis is undercutting the
economic recovery in the US, which in turn poses a threat to US
President Barack Obama's re-election chances in November.
Draghi's remarks last Thursday sparked a market rally, which
continued into this week with shares across Europe rising Monday and
bond yields slipping.
Italy's borrowing costs fell, at bond auctions totalling 5.48
billion euros (7.16 billion dollars), on hopes of new ECB action to
resolve the eurozone debt crisis.
Meanwhile, the eurozone's blue eurostoxx 50 ended the session
1.7-per-cent higher at 2340 points. However, the euro slipped back
0.4 per cent to 1.2247 dollars.
Draghi's comments were followed by coordinated comments from
European political leaders aimed at easing market tensions.
German Chancellor Angela Merkel interrupted her vacation in the
Alps bordering Austria and Italy to issue joint statements first with
French President Francois Hollande and then with Italian Prime
Minister Mario Monti, echoing the ECB chief's remarks.
