David Prosser: Eurozone in no mood for Geithner's mercy mission

 

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The Independent Online

Tim Geithner was polite enough to say that, given the economic problems back home, the US Treasury Secretary was notnecessarily in the best position to offer Europe advice on how to get out of its mess. Still, Mr Geithner must have wondered why he had bothered with a 6,000-mile round trip, given the Europeans' obvious distaste for any of his ideas.

No, they said, to an expansion of the European Financial Stability Fund, whether directly or through leverage. No, they said, to stimulating European economies with more expansionist fiscal policy. And no, they said, to Mr Geithner's contention that a new tax on banks would not work.

The announcement on Thursday that the world's central banks are to provide unlimited dollar loans to financial institutions struggling to raise reserve currency liquidity in the bank-to-bank market has bought the eurozone a bit of time. The bloc's leaders appear to be intent on using every minute of it.

Still, they must understand that Thursday's intervention addresses one of the symptoms of the eurozone crisis – mounting concerns about the strength of certain banks – rather the condition itself. Those symptoms will remain acute until the markets are convinced that the rot has been stopped in Greece (and thus that it will not spread).

If the idea of making Greece wait longer for its second tranche of bail-out cash is to convince us that the authorities intend to hold them to every last penny of the austerity measures they have promised, it does not seem to be working. The latest survey of independent economists reveals two-thirds now expect Greece to default. That won't be helped by reports its private-sector lenders are not playing ball by agreeing to take haircuts on the loans they have already extended.

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