Tim Geithner, U.S. Treasury Secretary, Joins Eurozone Meeting
WROCLAW, Poland (AP) - Finland's finance minister said she doesn't expect the eurozone to resolve a dispute over her country's demand for collateral for loans to Greece at a meeting Friday — adding to concerns over the currency union's ability to stamp out its crippling debt crisis.
U.S. Treasury Secretary Timothy Geithner joined the meeting in Wroclaw, Poland — the first time that a U.S. finance chief has attended such a gathering — in a sign of how the U.S. is getting increasingly concerned over the global impact of the eurozone debt crisis.
Geithner has been pushing his European counterparts to finally find a lasting solution to its debt troubles, which have dragged on for almost two years.
Britain's Treasury chief George Osborne, who was to attend a broader meeting of finance ministers including EU countries that do not use the euro, urged eurozone leaders to make a strong statement. Britain trades extensively with the eurozone and its banks are exposed to troubles on the continent.
Osborne said there needed to be a "much better international response" and added he would be "looking for my European colleagues to send a clear signal that they truly recognise the gravity of the situation and that they are dealing with it."
But hopes for some tangible progress were quickly thwarted, when Finnish Finance Minister Jutta Urpilainen said that there was still no solution to her country's demand for guarantees to back its contribution to a second, €109 billion rescue package for Greece.
The small Nordic country's demand has triggered similar requests from several other states, including Austria and the Netherlands.
If the requests were fulfilled, providing the collateral could shave off hundreds of millions of euros from the overall bailout sum.
"Unfortunately I don't see that we can find a solution tonight," Urpilainen said as she arrived for a meeting with her eurozone counterparts in Wroclaw, Poland.
The dispute has unsettled markets, as it is another sign of divisions between the 17 countries that use the euro over whether they can actually save Greece, which has been relying on emergency loans from other eurozone countries and the International Monetary Fund for more than a year.
The rescue faces several other challenges. Greece's international debt inspectors interrupted their most recent review mission two weeks ago after they discovered that Athens was set to miss its budget targets. Since then, Greece has announced a special property tax, which the government says should cover the revenue shortfall.
Meeting strict budget, privatization and reform targets set out in Greece's deal for a first €110 billion rescue package is a prerequisite for receiving the next aid installment, which is due by the end of the month.
Without the €8 billion ($11 billion) tranche, the country would run out of money by mid-October and potentially defaulting on its debts.
However, Austria's Finance Minister Maria Fekter, traditionally a hard-liner when it comes to sticking to the bailout conditions, said she was "very optimistic that the next tranche can be paid out to Greece."
She warned against a Greek default, which she said would be "very costly."
However, she did not rule it out as a possibility in the future.
"Should a situation arise, where this way (of providing rescue loans) suddenly becomes more expensive than the alternative, we will have to think about the alternative," Fekter said. "But at the moment this is not yet the case."
Referring to the debate about collateral, Fekter said she had proposed a model where guarantees would be available for everyone that wants them.
Friday's meeting comes after several turbulent weeks on global financial markets, triggered by fears over the impact of a potential Greek default as well as mounting evidence of a slowdown of the world economy. Some eurozone banks have been facing difficulties to obtain short-term funding in U.S. dollars as other lenders worry about their exposure of the debt of struggling countries like Greece, Spain or Italy.
Those funding issues pushed the European Central Bank, the U.S. Federal Reserve and three other major central banks to give banks easier access to dollars on Thursday, in the hope they can stop credit from seizing up like it did after the collapse of U.S. investment bank Lehman Brothers three years ago.
Greek Finance Minister Evangelos Venizelos, meanwhile, defended his country's efforts, and called on the other eurozone states to clear up the remaining issues that have delayed the new bailout and quickly implement changes to the region's bailout fund that were also agreed at the July summit.
"We are on track to implement the (bailout) program," Venizelos said. "And we believe that the implementation of the decision of the 21 July is the unique way to go ahead. Not only for Greece but for the eurozone as a whole."