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Europe’s Banks Face Escalating Credit Crunch

September 16, 2011 at 12:00 AM EDT
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JEFFREY BROWN: Europe’s economic leaders struggled anew to find a way toward a rescue plan for troubled nations and aid for vulnerable banks. They also heard a strong and pointed challenge from a key voice on this side of the Atlantic.

With their banks facing a growing credit crunch, and with a looming default deadline for Greece, and other nations also already receiving bailout funds, European finance ministers met in Poland today to try to resolve longstanding differences over how to deal with the financial crisis.

This time, in an unprecedented move, they were joined by a high-level visitor from the U.S., Treasury Secretary Timothy Geithner, who urged the 17-member nations of the eurozone to act quickly and take much stronger measures. But, once again, there was no resolution. The head of the group of finance ministers spoke after the meeting with Geithner.

JEAN-CLAUDE JUNCKER, Eurogroup: Different points were mentioned. This wasn’t a decision-taking meeting we had with Tim. It was a dialogue amongst friends, continuing the one we had in Marseilles, and preparing the one we will have the other day on a different continent. We are not discussing the increase or the expansion of the EFSF with a non-member of the euro area.

JEFFREY BROWN: That was followed by a question from a reporter.

QUESTION: Are you optimistic that maybe Europe or the eurozone can speak a bit more with one voice? 

JEAN-CLAUDE JUNCKER: No.

(LAUGHTER)

JEAN-CLAUDE JUNCKER: But we have to come back to verbal discipline.

JEFFREY BROWN: Geithner responded to pushback from several European ministers, saying: “Of course your financial challenges in Europe are within your capacity to manage financially. You just have to choose to do it.” And, he warned, “One of the starkest ways to emphasize the importance of Europe getting on top of this is that you don’t want the future of Europe to rest in the hands of those who provide financing to the IMF.”

Today’s meeting came a day after the world’s major central banks, including the U.S. Federal Reserve, took coordinated action to make funds available to European banks. That move lifted world markets yesterday, and modest gains continued today.

Europe’s finance ministers will meet through tomorrow.