US treasury secretary Timothy Geithner said governments need to act "quickly and with force" to prevent financial crises from spreading, as he took part in two days of talks in Europe.
The European Union will do what's necessary to prevent instability, Mr Geithner told reporters today in London after meeting with British chancellor of the exchequer George Osborne. "Markets want to see action," he said.
Mr Geithner will also stop in Berlin and Frankfurt to discuss the €750 billion rescue package aimed at containing the Greek debt crisis. He will travel to Frankfurt later today for a working dinner with European Central Bank president Jean-Claude Trichet and will meet with German finance minister Wolfgang Schaeuble in Berlin tomorrow.
The Group of 20 nations will reinforce the effort to prevent financial crises, Mr Geithner said. He also said Greece should implement its commitments, and governments around the world need "carefully designed" and coordinated measures to strengthen the global financial system.
"The basic lesson for financial crises is that you have to come in and act quickly and with force," he said.
Investors are not confident that measures so far, including Germany's unilateral ban on some financial trades, austerity plans by indebted euro zone members or even a €750 billion rescue fund will be enough to prevent Europe's woes from derailing the global recovery.
One senior US Treasury official said Washington was unhappy with Germany's decision to go it alone in banning some types of speculative trading as it considers the measures counter-productive.
In fact, Germany yesterday proposed extending restrictions on speculative short-selling trades to include all shares, a government source said.
Last week, the euro area's biggest country imposed a ban on naked short-selling of shares in top financial firms and euro government bonds and using credit default swaps for speculation.
Also yesterday, Italy's cabinet approved a multibillion-euro package of budget cuts designed to slash the government's deficit to beneath the EU ceiling of 3 per cent of GDP by 2012, a government source said.
A draft of the package included a four-year freeze on public sector salaries, and a reduction in state personnel by replacing only one in five of those who leave.
Bloomberg, Reuters