European officials defend crisis measures

Europe’s finance chiefs have reassured the world they are addressing the debt crisis days after markets were shaken by dire IMF and World Bank warnings that the global economy was entering a “dangerous phase”.

The assurance came on Friday, before the IMF-World Bank annual meeting in Washington, to be held against a backdrop of US deficit and eurozone debt concerns.

The finance officials said they had a firm hand on matters and that the rescue of Greece, ground zero of the crisis, was progressing.

Francois Baroin, the French finance minister, said the July 21 plan of new money for Greece and to broaden the scope of the emergency European Financial Stability Facility had already led to steps to stabilise the eurozone.

“On this agreement, we are hand in hand with Germany to implement the July 21 agreement, not to move away from this strategy,” he said.

Jean-Claude Trichet, the European Central Bank head, stressed that the situation as a whole was “very, very different from perception”.

“We are not in denial at all,” he added. “We have a global crisis of the creditworthness of sovereigns and we are the epicentre of this crisis.”

Germany’s central bank president, Jens Weidmann, said the situation was “much better than the sentiment” and suggested that a new recession was “unlikely”.

Wolfgang Schaeuble, the German finance minister, fended off criticism from Washington and elsewhere about EU indecisiveness in the face of possible public debt defaults and the fracturing of the eurozone.

“We in Europe are generally on the right path, especially we in Germany,” he said.

The comments followed a surprise late-night statement from the Group of 20 leading economies aimed at calming markets.

Looming recessions

Worries of looming recessions in the US, Europe and Japan triggered a global rout in equities on Thursday, with some estimates suggesting $1tn were wiped off the value of US stocks. 

“We … are committed to a strong and co-ordinated international response to address the renewed challenges facing the global economy,” the G20 finance chiefs said.

“We are taking strong actions to maintain financial stability, restore confidence and support growth.”

Timothy Geithner, the US treasury secretary, said markets were outpacing their reaction to the eurozone crisis.

He praised the ECB for firm action in wrestling with the eurozone’s spiralling debt and deficit problems, “substituting for the actions of government”.

“All of us who look at Europe going through this have to have admiration for what they are trying to do and recognise the difficulty of it,” Geithner told the BBC in an interview to be broadcast early on Saturday, excerpts of which were provided by the treasury.

But he said that “markets are moving much more quickly than they are moving, and these things have the classic dynamic that the longer you wait, the harder it is to solve”.

Geithner said: “They are trying to build those institutions, that is an enormously complicated task to do in normal times, much less in crisis. They have 17 governments trying to resolve their difficult politics.”