Top officials from the US Treasury and the International Monetary Fund are privately worried that Europe’s `Grand Plan’ to overcome the debt crisis is fundamentally deficient and may fail to restore market confidence.
G20 finance ministers praised Europe’s efforts to “maximise the impact” of the EU’s €440bn bail-out fund (EFSF) and ensure that the region’s banks are “adequately capitalised”, but there were heated exchanges behind closed door as the Anglo-Saxon states, and India rebuked Europe’s leaders for failing to grasp the nettle and mobilize the full lending power of the European Central Bank.
“They clearly have more work to do on strategy and details,” said US Treasury Secretary Tim Geithner. “In financial crises, it is more risky to act gradually and incrementally than to act with bold force”.
Diplomats say Mr Geithner’s plan to use the ECB as a guarantor of eurozone sovereign bonds was dismissed out of hand, while the EU failed to offer clear assurances that bank recapitalisation would be carried out with sufficient speed and scale to halt an incipent run on the system.
Olli Rehn, the EU’s economics commissioner, said Brussels will announce a “very serious plan” over come days to beef up banks and strengthen the firewall against contagion.
German foreign minister Guido Westerwelle politely told the US to mind its own business. “I cannot understand some of the comments of our American friends. You can’t solve a debt crisis with more debt,” he told Bild Zeitung.