Treasury Secretary Timothy Geithner on Wednesday urged European leaders to act more forcefully to solve Europe's escalating debt crisis and said they have the financial and economic capacity to do so.
"They recognize that they have been behind the curve. They recognize that it will take more force behind their commitments," Geithner told CNBC television.
Frustrated with Greece's failure to meet the fiscal goals set as a condition for a bailout, leaders of France and Germany were due on Wednesday to press Greek Prime Minister George Papandreou to enforce the harsh austerity measures.
Fears of a Greek default have shaken global financial markets. Moody's cut the credit ratings of two French banks, Societe Generale and Credit Agricole, because of their exposure to Greek debt.
Geithner tried to shore up confidence in Europe's ability to resolve its crisis and safeguard a banking system laden with poorly performing sovereign bonds.
"There is no chance that the major countries of Europe will let their institutions be at risk in the eyes of the market. There is not a chance," he said.
German Chancellor Angela Merkel on Tuesday tried to squash talk that Greece would default on its obligations and sink the 17-nation euro zone currency area, a message Geithner tried to amplify.
"They are absolutely committed and they have the financial capacity, the economic capacity to do what it takes to hold this thing together," he said. As head of the New York Federal Reserve Bank at the height of the 2007-09 financial crisis, Geithner helped craft a plan to prop up major Wall Street banks and stabilize the financial system.
Geithner is taking the unprecedented step of attending an informal meeting of EU finance ministers in Poland on Friday. He is expected to urge the ministers to speed up the ratification of changes to their bailout fund.
"To solve a financial crisis, you need reforms that fix your financial system, in (Greece's) case shrink their government and make growth better over time," he said.
"It takes time and it does not work unless it's supported with money. There's just no way it works -- you can't expect anything to happen without giving them the capacity, the breathing space to be able to borrow."
The head of the European Commission has announced that it will soon present options for issuing a common euro zone bond.
(Reporting by David Lawder, Lisa Lambert and Rachelle Younglai; Editing by James Dalgleish and Dan Grebler)
Copyright 2011 Thomson Reuters. Click for Restrictions.
More:European Debt Crisis Greek Prime Minister George Papandreou Greek Debt Crisis Treasury Secretary Timothy Geithner Societe Generale And Credit Agricole
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