European finance ministers ruled out efforts to spur the faltering economy and showed no signs of taking up a proposal by U.S. Treasury Secretary Timothy Geithner to increase the firepower of the debt crisis rescue fund.
Inviting Geithner to a euro meeting for the first time, the European finance chiefs said the 18-month debt crisis leaves no room for tax cuts or extra spending to spur an economy on the brink of stagnation.
“We have slightly different views from time to time with our U.S. colleagues when it comes to fiscal-stimulus packages,” Luxembourg Prime Minister Jean-Claude Juncker told reporters after chairing the meeting yesterday in Wroclaw, Poland. “We don’t see any room for maneuver in the euro area which could allow us to launch new fiscal stimulus packages. That will not be possible.”
Europe’s economy will barely grow in the second half of 2011, a casualty of the debt buildup that 256 billion euros ($353 billion) in aid for Greece, Ireland and Portugal has failed to extinguish.
Geithner made little headway with a call for Europe to boost the capacity of the 440 billion-euro rescue fund, known as the European Financial Stability Facility, by enabling it to tap the European Central Bank.
Juncker said there was no discussion of expanding the fund today -- at least not while the American guest was in the room.
“We are not discussing the increase or the expansion of the EFSF with a non-member of the euro area,” he said. German Finance MinisterWolfgang Schaeuble spoke of a “very intensive but friendly discussion” and Austrian Finance Minister Maria Fekter found it “peculiar” to be lectured by the U.S., a country with higher aggregate debt than the euro area.
Instead, the ministers recommitted to a July 21 decision to empower the fund to buy bonds in the primary and secondary market, offer precautionary credit lines and create a bank- recapitalization facility. The target for completing national approvals of the new powers slipped to mid-October.
Geithner preached the lessons of the emergency banking support provided by the Treasury and Federal Reserve in reaction to the collapse of Lehman Brothers Holdings Inc., mixing it with criticism of Europe’s crisis-management coordination.