EU bank chief calls debt level 'encouraging'
Anti-austerity protests put an early end to debt crisis talks marked by differences between US and EU finance ministers.
Last Modified: 17 Sep 2011 08:48
Wolfgang Schaeuble, Germany's finance minister, talks with counterparts at an informal meeting in Wroclaw [AFP]

The eurozone's debt level is "probably better" than global rivals, Jean-Claude Trichet, European Central Bank chief, has said as European Union talks focused on resolving the Greek crisis wrapped up in Poland.

"If I take the euro area, and the EU as a whole, the situation is quite encouraging compared with other major advanced economies," Trichet said on Saturday, tipping a combined year-end deficit at 4.5 per cent of GDP.

He added of the eurozone's medium-term outlook that "taken as a whole, it is probably better than other major advanced economies".

Trichet was speaking as ministers completed two days of talks marred by a clash of thinking between Timothy Geithner, the US treasury secretary, and leading European finance ministers, both German and Belgian finance ministers having highlighted the US as carrying the world's heaviest debt burden.

Ministers wrapped up early because of reports of several thousand demonstrators assembling at a nearby stadium in the south-western Polish city of Wroclaw for an anti-austerity protest unions said would draw tens of thousands.

Bailout conditions

Before Saturday's protests, the European Trade Union Confederation and Polish affiliates including Solidarity, the movement that helped bring down Poland's communist regime in 1989, said in a statement they would "will point out to Europe's political leaders ... the need for a change of course".

The trade unions called for "solidarity", not more austerity.

The two-day talks at Wroclaw's Centennial Hall conference centre have already seen a clash of ideas between Geithner and Wolfgang Schaeuble, the German finance minister.

On Friday in Wroclaw, the 17 eurozone states decided to postpone until October a decision on whether to hand over the next tranche of an agreed emergency loan package to Greece - the eurozone member in the eye of the storm - worth $11bn.

With Greece desperately trying to show its austerity drive meets bailout conditions, Athens has warned it will run out of funds by the middle of October, endangering pensions and state salaries while awaiting a breakthrough in the ratification stalemate.

The current EU president, Poland, took the decision to invite Geithner to the talks on Friday, in a sign of spiralling global concerns.

But Geithner and Schaeuble disagreed sharply over the way forward.

Debt mountain

Geithner urged eurozone leaders to bolster a $607bn rescue fund for troubled member states, but saw that demand instantly rebuffed by Germany.

Germany instead demanded the US drop its opposition to a global financial transactions tax - resisted by Geithner.

"What's very damaging is not just seeing the divisiveness in the debate over strategy in Europe but the ongoing conflict between countries and the [European] Central Bank," Geithner said on the sidelines of the talks in Wroclaw.

"Governments and central banks need to take out the catastrophic risk to markets."

Although Washington later denied he was writing "prescriptions" for Europe to follow.

The US treasury's calls came after eurozone, US, Japanese, Swiss and British central banks took markets by surprise on Thursday, announcing they will provide funds to commercial banks threatened by exposure to the eurozone's debt mountain.

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