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U.S. Presses Europe on Banking Crisis
Looks like someone is beginning to panic.President Barack Obama, who was swept into office amid a financial crisis, is trying to avoid being swept out by one. Obama administration officials are stepping up efforts to push Europe to quell an escalating debt crisis that poses serious risks to the U.S. economy just five months before the presidential election. U.S. officials are trying to convey lessons from the 2008 global crisis to ease Spain's debt troubles before they cause more financial turmoil and harm to the world global economy. In private meetings, they are urging officials in the 17-nation euro zone to take swifter action to calm markets, reassure depositors about their banks' health, and prevent some of Europe's largest countries from suffocating under high borrowing costs and weak economic growth. A key lesson from the crisis, U.S. officials say, is act quickly and decisively to stabilize the financial system and prevent investor panic. For instance, U.S. officials want Europe to use the continent's rescue fund now around 700 billion ($866 billion)to provide assistance to governments struggling with soaring borrowing costs. Allowing the rescue fund to directly recapitalize banks, instead of forcing the struggling governments to borrow first from the rescue fund, would help prevent bank failures and enable the banks to continue lending, which would help support economic growth, the officials believe. Under this approach, the governments wouldn't have to boost their own debt loads by borrowing from the fund. The U.S. channels much of its advice through the International Monetary Fund, in which it is the largest shareholder. The IMF has been urging Europe to use the rescue fund for that purpose, but the idea is opposed by Germany and other euro-zone nations. The U.S. and IMF urge Europeans to move more boldly toward tying their national economies more closely together. Posted by: tipper 2012-06-01 |
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