European finance ministers struggled Friday to resolve hurdles that are holding up their latest rescue plan for the euro, as the United States Treasury Secretary Timothy Geithner warned that failure to act could leave "the fate of Europe" to outsiders.
The meeting comes at a time of continued anxiety in the financial markets, and ahead of a looming deadline for Greece’s foreign creditors to decide whether to release the next installment of its original bailout. If Greece does not get the €8-billion, or $11-billion U.S., tranche, in October, it could be forced to default on its debts, with potentially catastrophic repercussions for global growth.
That Mr. Geithner made the trans-Atlantic journey -- just one week after attending the meeting of finance ministers from the Group of Seven nations in Marseilles, France -- was seen as a signal of the seriousness with which the United States views the debt crisis.
In an unprecedented appearance at a meeting of finance ministers from the euro zone, Mr. Geithner raised the possibility of the bloc giving its €440-billion bailout fund more firepower by allowing it to act like a bank and borrow more freely on the financial markets, according to one senior European official. A similar model was used in the United States when the financial crisis started, and is considered to have helped restore calm and confidence to markets.
“He raised it among other issues but did not press it,” said Jean-Claude Juncker, president of the group of 17 euro-zone finance ministers.
But Mr. Juncker also said that the euro group was not discussing “an increase or expansion” of its bailout fund "with a non member of the euro area."
The talks with Mr. Geithner lasted for an hour and took place in the morning session of the euro group. Mr. Geithner, was due to join talks later with finance ministers from all 27 European Union nations.
Earlier, the U.S. Treasury said it would not comment on the detail of discussions. But at a separate business conference in Wroclaw, Mr. Geithner appealed to Europeans to solve the crisis themselves.
Not all European ministers appeared enthusiastic at the prospect of being confronted by a senior U.S. official at their informal meeting in the picturesque city of Wroclaw.
Asked whether Mr. Geithner, was there to listen or talk, Belgium’s Finance Minister, Didier Reynders, said that "the best solution is to listen." Mr. Reynders added that he would like to hear how the United States intended to get around its economic problems and reduce its debt and deficit levels.
But Europeans themselves concede that their continued bickering and failure to put in place the deal reached on July 21 to expand the scope of their bailout fund has made the financial markets nervous.
"The problem is not words, the problem is deeds," Jean-Claude Trichet, president of the European Central Bank, said.
By midday, the discussions failed to yield a breakthrough in one of the key technical issues that threatens to obstruct the new bailout package for Greece -- Finland’s request for collateral from Greece as a condition for its participation in the latest rescue.
Other nations object to arrangements that would give Finland preferential treatment.
The discussions also include what assets could be offered as collateral, and whether shares in state-owned companies or real estate might be acceptable.
Mr. Juncker said that if collateral is provided it will be done "at an appropriate price," suggesting that this will deter most other creditor nations from insisting on it.
But the collateral issue is just one of several obstacles. International lenders early this month suspended their review of whether the Greek government has done enough to ensure the release of the next tranche of aid, saying they wanted to give Athens more time to work on its 2012 budget.
Discussions will intensify next week and, on Thursday night the Greek Finance minister, Evangelos Venizelos, had dinner with his German counterpart, Wolfgang Schäuble at a hotel in the city centre.
