Geithner sees EU crisis as test of credibility
Treasury Secretary Timothy Geithner said he is "very encouraged" in the latest developments to resolve the European debt crisis, during a briefing following meetings with European counterparts in Germany. Making it through the financial crisis, Geithner said, will take a "very substantial commitment and a sustained commitment of political will." Geithner said resolution would come in three key factors: economic reforms in European Union countries, reforms to create more fiscal union and support from European central banks to let governments borrow at sustainable interest rates. The Treasury Department head spoke during a news conference in Berlin Tuesday on the first of his three-day trip to meet with European leaders. "Financial crises, of course, are ultimately resolved when governments and central banks succeed in creating conditions that make it compelling for investors to take the risks involved in lending to governments and to banks," Geithner said. "That's, of course, the ultimate test of credibility." Geithner also said the International Monetary Fund is playing a "central role" in resolving the crisis. The IMF approved the equivalent of a roughly $2.9 billion tranche from its emergency loan program for Greece. Standard & Poor's soured on Europe Monday, as the credit ratings agency placed 15 EU members on credit-watch negative. The firm said there is a 40% chance of a recession in Europe, particularly in Spain, Portugal and Greece. Six central banks, including the Federal Reserve, said last week that they would provide liquidity to the global banking system to ease strains on European markets. Directing comments back home, Geithner said although much of the attention is on Europe, U.S. leaders still have much to do. "We're working very hard also facing complicated politics to try to make more progress against those basic objectives," he said. Geithner met Tuesday with German Finance Minister Wolfgang Schauble in Berlin, and in Frankfurt with European Central Bank President Mario Draghi and Bundesbank President Jens Weidmann. He'll meet Wednesday with French President Nicolas Sarkozy and Spain Prime Minister-elect Mariano Rajoy Brey, and Thursday with Italian leader Mario Monti. Write to Andrew Scoggin. Follow him on Twitter @ascoggin.