US Treasury Secretary Timothy Geithner and his German counterpart Wolfgang Schaeuble held informal talks on the ongoing eurozone debt crisis on Monday, three days before the European Central Bank (ECB) announces its latest decision on interest rates.
After their talks, the two finance ministers issued a joint statement reaffirming their commitment to stabilizing the global economy. They also pledged to "continue to cooperate closely" to achieve the common objective.
The two "emphasized the need for ongoing international co-operation and coordination to achieve sustainable public finances, reduce global macroeconomic imbalances, and restore growth," and "expressed confidence in euro area member states' efforts to reform and move towards greater integration."
The meeting between Geithner and Schaeuble took place at the German North Sea island of Sylt, a luxurious resort where the German finance minister is on a holiday. Geithner will now travel to Frankfurt to hold talks with Mario Draghi, president of the European Central Bank.
Incidentally, Italy and Spain saw their borrowing costs ease on Monday as investor confidence improved on hopes of some crucial action from the European Central Bank, which is due to hold its rate-setting session this Thursday.
Nevertheless, preliminary data from the statistical agency INE revealed that the Spanish economy sunk deeper into recession in the second quarter with a 0.4 percent contraction, following a 0.3 percent shrinkage in each of the previous two quarters.
Moreover, the eurozone outlook also looks increasingly bleak as rating agency Standard & Poor's on Monday slashed its 2013 growth forecast for the region to 0.4 percent from the earlier predicted 1 percent.
The ECB is now expected to adopt some bolder moves to handle the debt crisis threatening the 17-member eurozone. Hopes are high after ECB President Draghi pledged last week that the bank is ready to do whatever it takes to defend the euro.
Draghi's assurance from last Thursday is seen as a signal that the ECB may consider resuming purchases of government bonds. He is apparently on a mission to get different governments and central bankers to agree on measures to help lower borrowing costs for troubled euro nations.
Germany, France and Italy have vowed to support Draghi's pledge to protect the euro. Investors eagerly await to to see whether the ECB chief would deliver on his promise on August 2. Eurogroup Chief Jean-Claude Juncker said in interviews published over the weekend that the eurozone will work with the ECB to solve the crisis.
Notably, the ECB bond-buying scheme known as the Securities Market Program was suspended in March. There are speculations that the central bank would propose that eurozone's permanent bailout fund, the ESM, be allowed to buy bonds of troubled euro nations. The developments come after high borrowing costs incurred by Spain and Italy in recent weeks escalated concerns about the very future of the eurozone.
Three Eurozone member states, namely Greece, Portugal and Ireland, have already availed bailout loans from the troika of creditors, comprising the EU, ECB and the International Monetary Fund (IMF), to shore up their ailing economies. Recently, Cyprus also initiated procedures for securing financial assistance.
by RTT Staff Writer
For comments and feedback: email@example.com