US tells Europe to step up its crisis response

May 27(EUObserver): US treasury secretary Timothy Geithner prodded European policy makers on Wednesday (26 May) to step up their efforts to restore eurozone stability.

Speaking alongside his UK counterpart George Osborne in London, Mr Geithner welcomed European government plans to cut budgetary deficits and the recently agreed €750 billion eurozone rescue mechanism, but added that markets now wanted to see action.

“What Europe should do is implement the programme they laid out,” said the US policymaker. “The basic lesson of financial crises is that you have to come in and act quickly and with force.”

The comments reflect the American administration’s perception that the EU was too slow to deal with Greece’s debt refinancing problems that subsequently spread to other countries in the 16-member eurozone.

Officials have also stressed the need for Europe to put the meat on the bones of the hastily cobbled together eurozone backstop fund agreed earlier this month, as markets continue to harbour doubts over potential implementation hurdles.

That agreement itself saw US President Barack Obama put in long distance calls to EU leaders such as Germany’s Angela Merkel, as Washington’s concerns over global contagion and European foot-dragging mounted.

The growing body of advice from the White House marks a turn-around from two years ago when European politicians pointed the finger at America’s subprime mortgage and banking industries as the cause of the financial crisis.

It also comes despite the fact that the US deficit is currently estimated at around 10 percent of GDP, well above the EU average of roughly 7 percent.

However, the US has grown increasingly concerned that the eurozone’s ongoing debt crisis could nip a nascent global recovery in the bud, and points to a series of bank stress tests carried out last year as helping to restore confidence in the US’s financial system.

Mr Geithner travelled to Frankfurt later on Wednesday for a working dinner with European Central Bank President Jean-Claude Trichet, and on Thursday goes to Berlin for a meeting with German finance minister Wolfgang Schaeuble.

There he is his expected to add his voice to a chorus of criticism against Germany’s decision last week to implement a unilateral ban on naked short selling, rather than seeking a more co-ordinated approach.