US treasury secretary pushes for action on European debt crisis

Timothy Geithner was in London to meet George Osborne and Bank of England governor Mervyn King
Timothy Geithner and George Osborne
US treasury secretary Timothy Geithner and UK chancellor George Osborne at a news conference at 11 Downing Street. Photograph: Suzanne Plunkett/Reuters

US treasury secretary Timothy Geithner flew to Europe today to push for joint action to tackle the ongoing European debt crisis.

Fresh from a trip to China, Geithner was in London today where he met UK chancellor George Osborne and, separately, Bank of England governor Mervyn King. He was then heading to Germany for meetings with European Central Bank president Jean-Claude Trichet and German finance minister Wolfgang Schäuble tomorrow.

Geithner was set to "discuss the economic situation in the region and the measures being taken to restore global confidence and financial stability and to promote continued recovery," according to the US treasury. He was also expected to urge European leaders to conduct bank stress tests. Geithner and other treasury officials frequently cite last year's US stress tests as one factor that calmed market turmoil caused by the financial crisis.

Stockmarkets in Europe and Asia rallied today following yesterday's heavy sell-off, after the OECD ruled out a double-dip recession in Europe. But the euro continued to slide, approaching a four-year low against the dollar, after US Federal Reserve chairman Ben Bernanke suggested that its dollar funding facility would not last forever. Speaking in Tokyo, he said the Federal Reserve's dollar swap lines with other major central banks, which were reinstated when the Greek debt crisis escalated, played an important role in stabilising markets, but that the Fed did not want to provide a permanent funding cushion.

Despite a €750bn (£640bn) rescue fund and austerity measures announced by several eurozone countries (and the UK), investors still take a dim view of the European debt situation which they fear could derail the global recovery.

"I think we all have to understand that the world economy is very lame and it is getting everybody nervous that the problems we are seeing in Greece (and) Europe will not be isolated in Europe," Microsoft chief executive Steve Ballmer said in Singapore.

Reuters reported that US treasury officials are unhappy with Germany's controversial decision to go it alone in banning some types of speculative trading. Yesterday Germany reportedly proposed extending a ban on "naked" short selling to include all shares. Some European countries still appear unwilling to copy the measure, though.

"I am not sure if there is a clear majority for following the German approach," Eddy Wymeersch, the chairman of the Committee of European Securities Regulation today. "It's not off the cards, but it's not on the cards," Wymeersch added.