US treasury secretary Timothy Geithner urged euro zone ministers to leverage their €440 billion bailout fund and free more resources to tackle the debt crisis during a meeting today, a senior euro zone official said.
Washington set up an emergency fund to support US lenders during the global credit crisis. With signs of stress in Europe now, the European Central Bank and those of Britain, Japan and Switzerland joined forces yesterday to reintroduce three-month dollar liquidity operations in the fourth quarter.
Analysts say the EFSF, set up in May 2010 and so far used to bail out Portugal and Ireland, must be increased in size to build market confidence that the debt crisis can be contained.
But Germany and others refuse to bolster the fund and euro zone national parliaments have yet to ratify new powers agreed for the fund two months ago that would allow it to make precautionary loans to countries under attack and buy sovereign bonds to prop up struggling states.
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Dean Popplewell
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