US, China pressure Europe on debt
The United States and China piled pressure on Europe yesterday to get to grips with its debt crisis before it risks causing bank runs and pushing the global economy into ruinous recession.
The US Treasury chief, in his most explicit warning to date about the crisis, said it was time for the European Central Bank to step up and take a central role to get it under control.
World financial markets have been wracked by fears the Greek debt crisis could overwhelm other euro zone countries and their banks, but took some comfort on Friday from signs of new resolve by European officials to bolster defences after nearly two years of what many see as half-hearted action that has policy-makers talking openly of possible Greek default.
"The threat of cascading default, bank runs, and catastrophic risk must be taken off the table, as otherwise it will undermine all other efforts, both within Europe and globally," US Treasury Secretary Timothy Geithner said in a speech at the International Monetary Fund.
Geithner's warning was echoed by China's central bank governor Zhou Xiaochuan, but with an added twist that countries running big deficits, like the United States, also must act responsibly.
"The sovereign debt crisis must be resolved promptly to stabilize market confidence, and forceful and credible fiscal consolidation measures are needed in relevant economies to alleviate sovereign debt stress," Zhou told the IMF.
The semi-annual gathering of the IMF and World Bank is dominated by worry about the risk that Europe now poses to the rest of the world. As European Central Bank President Jean-Claude Trichet put it on Friday: "We (the euro zone) are the epicentre of this global crisis."
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