–German Fin Min Says Geithner,Schaeuble Joint-News Conference Monday

By Denny Gulino

WASHINGTON (MNI) – The U.S. Treasury Department still had nothing
to say Friday about a German government announcement hours earlier that
Treasury Secretary Tim Geithner is making a sudden trip to Europe to
hold a news conference Monday with Finance Minister Wolfgang Schaeuble.

The silence prompted reporters to resurrect Geithner’s comments
three days ago in which he twice warned European authorities against
leaving Europe on the edge of an “abyss.”

The German Finance Ministry issued a press release saying Schaeuble
and Geithner would hold a joint news conference Monday at a North Sea
resort where Schaeuble is staying, the German island of Sylt near the
Danish border.

The press release provided no details of what is prompting a sudden
trip by Geithner to Europe that has still not been confirmed by the
United States.

Earlier in the week, in an interview on the PBS Charlie Rose Show,
Geithner said while European authorities have committed to do what it
takes to hold their financial system together, “They have not been fully
successful yet in making that commitment.”

He went on to say that a “good way to think about the challenge” in
Europe is to say, “If you leave Europe on the edge of the abyss, if you
leave it just teetering on the edge of financial disaster, it’ll be much
harder for this strategy to work.”

Countries like Spain and Italy, he said, “are doing very hard, very
tough, very necessary things” and, he added, “for this to work
politically for Europe and economically for Europe, those reforms need
to be complemented by more support.”

He agreed when Rose interjected, “Some say that Chancellor (Angela)
Merkel believes that she can always come in a rescue at the last
moment.” Geithner responded, “That’s right.”

Geithner then repeated his “abyss” observation after expressing
sympathy for Merkel’s position. “What she’s very worried about is that
if they relieve too much of the pressure, the incentive for reform will
fade and they’ll have spent a bunch of taxpayer’s money of Germany
without any real return to make Europe better.”

He continued, “And again, if you leave Europe on the edge of the
abyss as your source of leverage, your strategy’s unlikely to work
because you’re going to raise the ultimate cost of the crisis — much
more expensive to fix and you’re going to — you do a lot of damage to
the politics of those countries because the human costs of what’s
happening, not just in Greece but across Europe now are enormously
high.”

Geithner repeated that he thinks the Eurozone will survive intact
with its 17 members. “They’ve said ‘We will do everything it takes to
hold the European Union together,'” Geithner said. “And you could say
that’s what they’re trying to do, is to make it viable for the long
run.”

In another part of the Rose program, Geithner responded to a
question about the effect Europe’s problems are having on the United
States by agreeing the effect is notable. “Yeah,” he said, “it’s
reducing demand for U.S. businesses, for the things they produce and
sell both in Europe and around the world. It’s helping slow growth
everywhere, not just in Europe.”

Concern that “this crisis could intensify,” he said, “is also
causing businesses everywhere to pull back.”

Earlier Friday, Schaeuble appeared to welcome ECB head Mario
Draghi’s pledge to do whatever is necessary to save the euro, and
repeated there is a necessary precondition, that “politicians also take
and implement the necessary measures to overcome the financial and
confidence crisis.”

A spokeswoman for the Spanish government Friday denied reports that
Spain early in the week discussed with Schaeuble the possible need for a
300 billion euro rescue if its borrowing costs — which moderated
somewhat later in the week — remain high.

In its annual review of Spain’s economy, the IMF Friday said the
country’s economy will shrink by 1.7% this year and included a warning
of “significant downside risks.” The IMF also saw further contraction
next year of 1.2% for GDP. Both estimates were worse than the IMF’s
previous readings.

** MNI Washington Bureau: 202-371-2121 **

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